Stablecoins have become the talk of the town during the bear run of the crypto market that has been going on for over a year now. Stablecoins inherit the benefits offered by both the blockchain world and the world of the traditional fiat. But along with these benefits, shortcomings from both these areas also seep in. The major purpose of the creation of stablecoins was the elimination of volatility associated with regular cryptocurrencies.
Stablecoins tackle the issue of volatility by having a peg with fiat currencies or with some exchange-traded commodity. So are stablecoins better than normal cryptocurrencies?
The President/Founder of BlockchainBTM, Javad Afshar, recently got in touch with BlockPublisher as he answered this important question. As per BlockchainBTM’s website, Javad has over 44 years of experience in manufacturing, wireless communications, software and a number of other high technology and manufacturing industries worldwide.
Answering the question he said:
Stable coins are better than crypto as a means of transferring money. The more stable the currency the better it is adaptable. For example,if people want to transfer money from the US to other countries. The stable coin removes the risk of fluctuation in the value of transfer.
As implied here by Javad, stablecoins find their value in remaining stable in terms of their prices. Normal cryptocurrencies fluctuate too often in terms of their prices. This makes them highly unattractive for value transfer purposes. As prices can fluctuate within a matter of minutes, their usage as a payment method or for transfer of value becomes almost unnatural. Stablecoins change this.
Since stablecoins are pegged with fiat or some other exchange-traded commodity, the price fluctuation aspect is taken out of the picture. This makes them the optimal choice for making large-scale international payments and value transfer. Being on the blockchain network, the features of trust and transparency are also inherited by the stablecoin world.
Stablecoins form a bridge between the volatile world of cryptos and fiat. They try to merge the stability of the fiat world with the technological advancements of the crypto world. Although might not be classified as ‘pure’ cryptocurrencies owing to their peg to the fiat world, they can surely help improve the adoption of cryptocurrencies in the long run.