Stablecoins have taken the crypto world by storm during the bear market. With prices spiking up and plunging down in a matter of minutes, investors and the general people in the crypto arena have started to question the credibility of this world. Are cryptocurrencies supposed to act like stores of value or are they to be used as a means of making payments? And with price fluctuating at a very rapid pace, usage as a source of making payments does not seem too natural. Stablecoins present a solution to this.
Stablecoins are those cryptocurrencies that are backed by fiat or any other exchange-traded commodity. So the price fluctuation aspect of regular cryptocurrencies vanishes from the scene for stablecoins. All the inherent features of blockchain such as trust, transparency, and privacy are also made available. But on the other end, the drawbacks such as inflation of fiat and other commodities also get transferred. So are stablecoins better than regular cryptocurrencies?
The Chief Executive Officer of Anchor, Daniel Popa, recently got in touch with BlockPublisher as he gave his insights regarding stablecoins. Answering this question, he said:
Daniel: “Most stablecoins aim at nothing more than to mirror a fiat currency or commodity to which they are pegged. Fiats and commodities regularly fluctuate and are susceptible to inflation, therefore inevitably losing their original value, and so are the stable coins pegged to them. Although stablecoins offer lower volatility than a typical cryptocurrency, so does virtually any other type of investment out there in comparison to the current crypto market. There is, however, a future for stablecoins that are actually capable of preserving and increasing in value over time through smart design, ingenuity, transparency, stability, and predictability.”
Stablecoins have their own perks and features that give them the importance they have. While staying in touch with the traditional fiat framework, stablecoins present forward the important features of the crypto world such as transparency, trust etc. They essentially mirror fiat currencies in the crypto world.
Further adding on to his statements, Daniel also said:
Daniel: “At Anchor, we have a team of financial experts, business leaders, and PhD mathematicians who have created a dual-token stablecoin that is pegged to a new index, the Monetary Measurement Unit (MMU), which represents the global economic growth. Leveraging key macro and micro economic factors of about 190 countries in the world, the MMU is an algorithm that calculates the total value of the global economic growth. The world’s economy is on the rise year after year, whereas fiats such as the US dollar, for example, have been losing about 50% on average of their value over the last 30 years. Anchor is safeguarded against inflation, impervious to cryptomarket volatility, and is a financial anchor that can stabilize other currency systems as well as the overall global economy.”
Stablecoins seemingly form a bridge between the crypto world and the world of fiat. Benefits and drawbacks of both the worlds seem to be merged in one entity. They do carry much importance in the crypto world as they help different people understand the prospects offered by blockchain which in turn leads to more adoption of this technology and the crypto world.
We are still early in the crypto arena. There’s a lot that needs to be explored, a lot that needs to be put in place. Even the role of bitcoin is not defined clearly in the mainstream financial market yet. It will be very interesting to see how things pan out for stablecoins as we move forward.
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