The volatility of the crypto world is unknown to nobody involved in this space. One day the market is seen shooting up and the very next day it is down on knees. In order to tackle this issue of price fluctuation, stablecoins were introduced in the crypto arena. Stablecoins are those cryptocurrencies that are backed by fiat. Tether, Gemini Dollar, USDC, Dai are some of the most common examples in this regard. Since these stablecoins tackle one of the biggest issue attributed to the world of cryptocurrencies, volatility, are they the future of this space?
The Co-Founder and Chief Operating Officer of Ternio, Ian Kane, recently got in touch with BlockPublisher as he gave his insights regarding the matter. Answering the question of whether stablecoins are better than normal cryptocurrencies, he said:
It’s important to define “better” – as what is good for one person/entity may not translate well to another. The benefit of a stablecoin is that the price doesn’t fluctuate. This is great for corporations, government entities, or anyone looking to move money quickly and easily. If you’re moving $1 million USD even a 1% decrease in value is significant – this is where stablecoins provide value and fluctuating currencies provide risk. The thing to understand is what is backing the stablecoin you select. In many cases it’s either FIAT currency, gold, diamonds, or something of the like. However, it is important to make sure that the asset is backed by something.
As pointed out by Ian here, stablecoins can prove to be extremely valuable for big corporations and institutions in the movement of large amounts of money as the price fluctuation is not that much as other cryptos. Besides, with stablecoins, all the inherited features of blockchain in the form of trust and transparency are also made available. Complete track of transactions can be kept in a decentralized trustless system of operation.
Adding on to his statements, Ian also said:
Fluctuating cryptocurrencies could be valuable to someone if you’re bullish on the asset or crypto space. BTC is worth $3400 as of this writing, but it could be worth $6000 next month. If you’re willing to take that risk and you don’t need the FIAT equivalent of your transaction now, then a non-stablecoin option could prove to be the “better” option.
Now here’s one important distinction to look at. Volatility is not all that bad. It is one of the reasons investors hurl into this space as profits can reach many times higher than expected in a matter of hours, same is the case for loss as well. All of this can help make the market. Thomas Power, a board member at BICRA, previously shared his opinions regarding volatility stating:
Volatility is a good thing as it makes markets work.
For the most part, volatility still remains an issue. People can’t use cryptos as currencies if they don’t know what the price is going to be the very next moment. Adoption of cryptos is also halted as a result of this. With stablecoins, things change. People get the same privacy, trust, and transparency of a crypto network but with much-improved stability. Stablecoins can surely help increase the adoption of the technology lying underneath the crypto world, blockchain. With people and corporations realizing the potential of the technology, it is likely that cryptocurrencies will also get more mainstream adoption in the future. Stablecoins in this regard are important and with all the possibilities that they open up, it seems that they here to stay.
SEE ALSO: Bitcoin (BTC) vs Stablecoins (V-3.0)