Stablecoins are gaining much attention nowadays as the bear market is continuing on. Since the world of cryptocurrencies too volatile, stablecoins were invented to tackle this issue. Stablecoins are essentially pegged to fiat or any other exchange-traded commodity so that price fluctuation does not take place much often. But are how are they compared to other regular cryptocurrencies.
Stablecoins inherit the main features of blockchain technology in the form of trust, transparency, privacy etc. The essentially act as a bridge between the fiat world and crypto world. But are stablecoins better than normal cryptocurrencies?
Bohdan Kit, CEO & Co-founder of Kattana, a professional crypto-trading terminal, recently got in touch with BlockPublisher as he answered this question in detail.
Bohdan: “Essentially, cryptocurrency as a social phenomenon was developed to give people a means of censorship-free value transfer. Thus, it solved the drastic problem of private transactions for those who could not perform them before due to government restrictions, political regimes etc. However, in order to use something as a medium of exchange, it must be reliable and trusted by the majority of people involved. The volatility of cryptocurrencies is what makes it unreliable medium of exchange and halts mass adoption. For the wider majority, the value risks associated with extreme volatility outweigh the benefits of privacy.
On the other hand, some cryptocurrencies are just not meant to become a medium of exchange and should be treated as a store of value. In such way, the volatility brings appreciation, hence value storage.”
Volatility of cryptos is something that has been an issue since the beginning. But it is also one of the reasons why the general public and the investor community hurl towards the crypto arena in order to gain quick profits. Stablecoins take this completely out of the picture. Further adding on to his statements, Bohdan also said:
Bohdan: “Anyway, the development of stable coins is a well-rounded effort to drive mass adoption of cryptocurrencies by pushing the volatility aspect out of the picture. Nonetheless, I would not say that it’s better than regular cryptocurrency, it is rather “a cryptocurrency for an average man” that has a great potential in driving some real world use cases that we yet to see.”
For someone new entering in the crypto world, stablecoins might make the most sense. Stablecoins employ blockchain technology at their core and can also get more acceptance in the traditional mainstream financial market owing to their peg with fiat or an exchange-traded commodity. In a nutshell, one can think of stablecoins as the middle ground for both the crypto world and the world of fiat.