Why You Need Stablecoins

No doubt, cryptocurrency has grown so much today that it has potentially disrupted our traditional financial economy. In fact, cryptocurrencies like Bitcoin and Ethereum are sometimes considered as alternative assets to precious metals such as gold. There is a reason for the strong growth of cryptocurrency across the globe. One of them is the security and privacy it provides for every transaction. It literarily removed the need for any intermediary institution when sending or receiving payments, hence opening up their use to anyone around the globe.

However, one downside to cryptocurrency is its high volatility. Their stability is short-term, making it pretty difficult for anyone to predict what their value will be in the nearest future. One day, they may be worth thousands of dollars and may not be worth that much in the following day.

To address this issue of volatility with cryptocurrencies, stablecoins were introduced. If you are new to this term, this article will show you many things about the fast-rising cryptocurrency alternatives. You will learn what stablecoins are and why you need to add them to your portfolio.

What is a stablecoin?

Unlike cryptocurrencies, stablecoins tend to be more stable in their prices. Because these tokens are backed by stable fiat currencies and assets such as gold, it is easy for them to maintain stable prices. There are several stablecoins that are backed by the U.S dollar, and there are some that are backed by other fiat currencies such as the Chinese Renminbi, Japanese Yen, etc.

Stablecoins are designed in such a way that they combine the benefits of cryptocurrencies and fiat currencies. That way, they offer the security and privacy offered by cryptocurrencies while still enjoying price stability.

Stablecoins can be used as a store of value or units of accounts, as well as for other purposes where cryptocurrencies may be less desirable because of their volatility.

What Can You Do With Stablecoins?

In case you are considering buying some stablecoins and wondering what you can actually do with them, this should help. There is a wide range of things you can do with these tokens –from using them as a store of value to transferring them around the globe. Here are some more ways to use stablecoins:

Minimize volatility:

because stablecoins are pegged to a more stable currency, they offer a kind of immunity against value fluctuation – one thing that is common to cryptocurrencies. With stablecoins, you can be sure the value of your tokens won’t rise or crash unpredictably in the next minute or anytime in the future.

Trade with them:

stablecoins are easy to transfer and you don’t need a bank account to hold one. So you can choose to trade with them. You can send stablecoins anywhere in the world – even to places where the U.S dollar may be hard to obtain or places where the local currency is unstable.

Transfer money cheaply:

this is one of the amazing benefits of owning stablecoins. It allows you to send money around the world and with a very small transfer fee. You can imagine someone sending as much as a million-dollar worth of USDC and only have fees less than a dollar.

Invest and earn interests:

it is far easier to earn good interest on stablecoins investment – far more than what a bank would typically offer you.

Send money internationally:

stablecoins are very easy to process and transaction fees on them are very low. Because of that, they have become a reliable option for many for sending money anywhere in the world. Thinking of a way to get money to your friends in far-reach countries, why not buy Tether and see how easy it could be to transfer money there with the lowest transfer fee possible.

Why Do You Need Stablecoins?

#1: To enjoy faster financial transactions

If there is any reason anyone should consider buying stablecoins, it will be because of its fast transaction speed. You can enjoy various faster financial processes with stablecoins. Since your transactions will be made independent of a central institution, delay is completely removed. You can also conduct transactions at all hours – even in off-bank times.

#2: You will enjoy lower transaction fees

Besides helping you to enjoy faster transactions, you will also be making those transactions at the lowest transaction fees possible. Credit card processing fees across major credit card companies like MasterCard, Visa, and AmEx is about 2% per transaction on average. Because of this, most small businesses would prohibit the use of certain cards because of their high fees or even charge customers more for credit card purchases. But with stablecoins, you can conveniently say goodbye to high costs of transactions. That’s a win-win case for both customers and businesses.

#3: Stablecoins are borderless

One reason cryptocurrencies have proved to be a real-world necessity for millions is because of their ability to be an anonymous, borderless store of value. For instance, in Venezuela, it is extremely difficult for people to flee the country with their fiat currency and also cannot transfer it internationally through their banks. Because of this, many people in the country have turned to Bitcoin, but the issue still remains that Bitcoin is subject to speculative markets. That makes stablecoin a better alternative because it is not subjected to market fluctuation or wild inflation.

#3: Transparency

Just like transactions on the blockchain can be viewed by anyone with internet access, stablecoins also provide the same level of transparency. Through regular audits of their backing process, stablecoins proved to be highly transparent in their processes.

#4: Stablecoins are programmable

Remember that these coins are fundamentally made of codes. Because of that, it is easy to add different features to them, adapting to changing needs. For instance, Walmart’s upcoming stablecoin will have loyalty programs built into it. That way, loyalty becomes directly integrated into the user’s experience.

#5: Perfect for the unbanked

More than 18 million Americans presently don’t have access to a bank account because of various reasons. But with stablecoins, the need for a traditional bank account is removed. All that anyone needs to own a stablecoin is internet access. That way, users will also enjoy full control over their funds, while completely staying immune to bank failures or limited bank hours.

Stablecoins also come as a great alternative for some small businesses that cannot open a bank account for their company because of one reason or another. With stablecoins, they can securely store their assets without the fear of any unpredictable fluctuation in values.

Some Common Examples of Stablecoins

. Tether (USDT):

Just like bitcoin is the most popular cryptocurrency, Tether is the most popular stablecoin too. In terms of trade volume and circulating supply, Tether tops all other stablecoins.

. USD Coin (USDC):

This comes second after Tether, and it’s also backed by USD. Plus, USDC is built on the popular Ethereum (ERC20) protocol.

. Paxos Standard Token (PAX):

Paxos is managed by Paxos Trust Company and regulated by the New York State Department of Financial Services (NYDFS). Like some other stablecoins, Paxos is also built on the ERC20 protocol.