Since the advent of stable coins, they’ve been a subject of discussion in the crypto space. Tether reaching at number 6, ranked according to the market cap, in the coin market has also marked the success of stable coins. Although Tether lost its peg to the USD and fluctuated the reputation of stable coins, but it soon regained its spot. Apart from that, new stable coins are being introduced in the market and the previous ones are being improved with layer 2 and 3 solutions (Zk-Dai for example). The presence of a stable coin pegged to the USD gives the impression of owning dollars digitally, with easier transfer mechanisms and globally accepted transactions. They also help diversify crypto into becoming transactional currency rather than the conventional store of value. The question that arises is, will they help increase transactions for crypto or will they take over BTC in becoming transactional currencies rather than stores of value?
Kevin Kelly, Co-Founder at Delphi Digital believed in this regard,
In the near-to-intermediate-term the short answer is yes. Despite all the great work being done to develop scaling solutions for Bitcoin, the volatility of BTC is still too high for most day-to-day use cases. Stablecoins are, by definition, pegged to fiat currencies (USD, etc.) and as a results are far less volatile for transactional purposes. Before BTC is widely used as a medium of exchange, we believe it must first prove itself as a store of value. This further deters people from using it as transactional money if they believe the value of BTC will rise substantially as a result.
Zach Alam, the Chief blockchain consultant at onboard.one also explained how Bitcoin wouldn’t be able to become a transactional currency and would remain an alternative to gold. He stated, talking to BlockPublisher,
It’s slow to send, at ~10 minutes to confirm – we can’t expect shoppers to wait that long before leaving a store with their products.
Bitcoin and other cryptocurrencies can be problematic in payment transactions when customers request refunds, as should the refund be paid in cryptocurrency or in the equivalent fiat? When prices have fluctuated significantly this can cause a good bit of contention between customers and merchants. With a fiat-pegged stablecoin this is not an issue. Additionally, stablecoins serve a purpose for moving in and out of fiat without traditional financial accounts, giving convenience.