Stablecoins are King: Why Stablecoins are Important in Cryptocurrency

why-stablecoins-are-important-in-cryptocurrency

TL;DR

  • Stablecoins offer stability and are resistant to the frequent volatility that characterizes the blockchain
  • Stablecoins serve as the bridge that connects the world of cryptocurrency to fiat
  • Stablecoins also serve as the asset for a global unified exchange of value

What is a Stablecoin?

Stability is its hallmark and efficiency is its watchword. Stablecoins are a class of crypto assets (digital currencies) whose values are pegged to existing traditional fiat currencies. Stablecoins act more like the digital versions of globally known fiat currencies such as the Euro, and dollars.

  • Algorithm-backed stablecoins: whose values are pegged against another crypto asset. Examples include DAI and Terra USD.

Stablecoins and Stability

No time is this more evident than now when the entire cryptocurrency market outlook is grim and not encouraging. Although stablecoins do not have the capacity to increase in value as altcoins do, they make up for this by offering stability to the otherwise volatile and unpredictable nature of cryptocurrencies.

Bridging the Fiat-Crypto Divide

To many, the entire ecosystem that surrounds blockchain looks overly complex and incomprehensible at the moment. However, having mastered how traditional fiat currencies work, they are able to transfer that logic to stablecoins.

Unified Global Exchange of Value

The dollar is known to be the global unit of international exchange, but moving fiat around is not an easy task, especially for international businesses. From challenges such as government restrictions on foreign exchange to the exorbitant charges by international money transfer businesses, the barriers to international trade keep mounting.

Conclusion

Stablecoins certainly contains all of the characteristics of what could be tagged as a progressive currency. There is no other way to say this than to state things frankly…that stablecoins are king.

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