There is no doubt that blockchain technology will have an impact on every industry. Blockchain technology seeks to develop new and improved payment systems for consumers all over the world, among many of its growing use-cases. The goal of blockchain technology is to create a payment system that is secure from breaches, is easy to use, transparent, decentralized, fast, and employs cryptocurrency at its core.
The cryptocurrency industry, however, is still in its infancy, even with over 11,000 new and unique assets. While the market has the potential to reach $2 trillion in market capitalization, it is barely a decade old when compared to the age-old gold market, which is valued at roughly $10 trillion.
Over 10,000 unique platforms have followed Satoshi Nakamoto’s lead and revealed their vision for the blockchain business, despite the fact that the market is just a decade old. The industry is developing some of the most exciting initiatives it has in years, whether it is introducing projects with proof of stake systems or offering smart contract platforms.
Although the mass creation of developing assets is advantageous to the industry, it also increases market volatility. The introduction of new assets, the media’s coverage of them, possible pump-and-dump scams, and other factors can all increase the consequences of market volatility.
The advent of Dogecoin and other memecoins puts the market’s volatility into context. In fact, even the most well-known cryptocurrencies, such as Bitcoin, have been unable to withstand the market’s volatility and susceptibility to speculation. For example, in early May, Bitcoin reached a new high of $65,000 per bitcoin; but, following Chinese government crackdowns and a few punches from institutional players and celebrities, it plunged about 50% to $35,000 today.
Although cryptocurrencies are intended to be globally safe, decentralized, and stable digital assets, their prices are extremely volatile and susceptible to speculation. Overnight, people all over the world have lost and gained millions of dollars. Although becoming a millionaire overnight is thrilling, that thrill fades when you lose hundreds of thousands of dollars.
This illustrates how volatile and risky the cryptocurrency market can be, especially when used as legal tender and the sole means of exchange for goods and services. Issues like these, on the other hand, do not go unnoticed in the Cryptocurrency ecosystem, and thankfully, platforms have developed solutions to this growing problem with the help of Stablecoins.
Stablecoins are a type of cryptocurrency. Achieving widespread adoption for cryptocurrencies has proven difficult because of their tremendous volatility. Though cryptocurrency is quickly gaining mainstream usage, it is not commonly used as a means of payment for products and services. While cryptocurrency initiatives frequently create and lead their own ecosystems, they are always built on blockchain technology, which is what gives the digital asset its worth.
Blockchains’ decentralization, immutability, and characteristics have aided in the creation of over 11,000 different cryptocurrencies today. Because one of the most serious flaws in the cryptocurrency market is its notorious volatility, the crypto ecosystem has come up with a remedy in the form of stablecoins.
Stablecoins, unlike cryptocurrencies, have a fixed value. Stablecoins are digital currencies that are linked to real-world assets. These assets could range from precious metals like gold to fiat currencies like the United States dollar. Stablecoins, at their foundation, are fixed-value cryptocurrencies built on blockchain technology. They share many of the same benefits as other cryptocurrencies, such as transparency, security, privacy, and accessibility, but without the volatility.
At the time of writing, the stablecoin market is valued at about $114 billion. Stablecoin was created with the intention of being used in the same way that cryptocurrencies are.
What are Stablecoins linked to?
The United Nations recognizes close 180 currencies worldwide. These 180 currencies include the European Euro, the Japanese Yen, and the United States Dollar, as well as other major world currencies. These currencies are widely accepted as a reliable store of value that may be exchanged for goods and services in all parts of the world.
These currencies’ values vary relatively little during the day despite the fact that inflation and money creation are taking place, as well as changing exchange rates and other variables. They are, nevertheless, less volatile than the bitcoin market. One of the main reasons why cryptocurrencies aren’t as widely used as they should be.
For example, you can buy a can of Soda for $1 from anyone in your country today, knowing that it is highly unlikely that the price would drop or rise by 50 cents tomorrow. However, because of the inherent volatility and unpredictability of cryptocurrency, you can never be sure if your soda can will be worth the same price an hour later!
Today, stablecoins are a type of digital money designed to resemble traditional, stable currencies. As previously mentioned, stablecoins are digital currencies that are backed by or linked to the value of an underlying asset. The underlying asset may now differ from one coin to the next. Many stablecoins are now tied to prominent fiat currencies like the US dollar, Japanese yen, and European euro, all of which are widely exchanged on exchanges.
How stablecoins are influencing the trading markets?
Stablecoins altered the game for the crypto industry. Stable coins, like cryptocurrencies, are built on blockchain technology; they enjoy many of the same benefits of blockchain technology, including transparency, security, privacy, and accessibility, but without the volatility that characterizes virtually every other cryptocurrency.
Today, the market for stablecoins exceeds $115 billion. They bring a fresh ecosystem to the table since they are not affected by the volatility of the bitcoin market. Stablecoins work in the same way as any other money. They’re a brand-new type of electronic currency. They might be used for trade, exchange, and decentralized financing. Simply simply, you may have the best of both worlds with stablecoins.
People can now put their phones down, scan a QR code, and pay for their morning coffee using cryptocurrency. Moreover, cryptocurrency payments may now be accepted as a method of payment by hotels and businesses all around the globe thanks to stablecoins. We can now utilize cryptocurrencies the way they were intended to be used, thanks to stablecoins. Stablecoins have effectively digitized our currency, and we couldn’t be happier.
El Salvador, for example, has crowned Bitcoin as its legal tender. Interestingly, Paraguay, Panama, Brazil, and other Latin American countries quickly followed El Salvador’s lead in their step towards financial freedom. Today, even parts of Africa are being digitized by crypto initiatives from around the world. Furthermore, in Ukraine, Sweden, and other European nations, cryptocurrencies are some of the most trending topics.
Cryptocurrencies may soon replace fiat currencies as more companies, organizations, and worldwide economies adopt them into their business models. With the launch of DeFi products like Crypto ETFs, Tokenized Stocks, and NFTs, as well as the rise of the DeFi industry, we may be on our way to a future when the asset will improve our lives.
With quicker transactions, greater security, reduced costs, smart contracts, money digitalization, and more, decentralized blockchain-based solutions might replace traditional banking. We can already take out loans, earn interest, receive incredible yields on our assets, borrow money, lend money, and more thanks to decentralized finance. The only thing that’s needed is an internet connection and a phone.
The bitcoin community as a whole thinks that a more efficient digital decentralized economy might eventually replace banks and finance. While it is unclear whether or not this will occur, it is unlikely that cryptocurrencies will entirely replace banking and governments in our economy.
Cryptocurrency and blockchain technology, on the other hand, have performed incredibly well, which is why governments all over the world may use blockchain solutions to prevent going extinct.
Stablecoins have already shown to be quite useful for international trade. Since users don’t have to pay exorbitant fees to centralized institutions to change their currencies, someone in one area of the world might get USD-backed stablecoins without having to convert them and lose a lot of money to fees.
Cryptocurrencies and stablecoins have a lot of potential in a wide range of financial services. Millions of households in poor nations appear to have been transformed by stablecoins. Stablecoins and cryptocurrencies now allow migrant workers and their families in different areas of the world to utilize digital wallets and receive stablecoins quickly, thanks to its fast transactions and cheap costs.
With the advent of the cryptocurrency business and the way it digitizes our money, it’s natural that nations all over the world must be friendly to it. Decentralized finance has emerged, catalyzed and established by cryptocurrencies, allowing anybody with an internet connection and a smart device to access financial services without going through the discriminatory procedure of traditional financial institutions.
Moreover, Stablecoins have become a significant component of crypto trade. Traders use them to store winnings in a safe asset tied to the US dollar, especially following a run-up in cryptocurrency values as we’ve witnessed recently.
Although these currencies are not widely utilized for international trade, soon we’ll see when they are. Moreover, another advantage of adopting stablecoins is that it enables for more effective crypto market arbitrage.
Moreover, stablecoins also enable the tokenization of stocks. By enabling fractional ownership of conventional assets, real-time access to markets, and improved liquidity, tokenized equities substantially reduce the barrier of entry for investors like you.
We might see Government-issued collateralized stablecoins in the future as governments shift their focus to central bank digital currency (CBDCs). However, economies may reserve full rights to such currencies.
With Bitcoin and Ethereum, the first decentralized cryptocurrencies, still battling to break into widespread adoption. A stablecoin backed by currency, on the other hand, has a higher chance of being accepted as something the general public can trust and embrace.
Stablecoins can be used as a digital equivalent to fiat currency. However, considering that fiat currencies still vastly outnumber their stablecoin equivalents in circulation, it is doubtful that it will entirely replace fiat currency.