Stablecoins have seemingly found their own little niche in the financial arena. Because they employ blockchain technology at their core, all the important feature of blockchain in the form of trust, transparency, and privacy are automatically inherited into them. Stablecoins are also pegged to fiat or some other exchange-traded commodity at the same time which takes out the issue of volatility from the scene. But are stablecoins better than normal cryptocurrencies?
BlockPublisher recently got in touch with the host of the Cryptonomics podcast, Mark Pesce, as he answered this very important question. He said:
One major advantage stablecoins have over normal cryptocurrenices is that they can be used as instruments to implement contracts with state-backed currencies. Parties will resist a contract denominated a floating cryptocurrency (particularly when they’ve been as volatile as they’ve been over the last year), while they’ll be much more likely to sign a contract denominated in a stablecoin. For that reason, stablecoins are the go-to for serious business contracts involving cryptocurrencies.
Since stablecoins eliminate the volatility aspect linked to other ‘normal’ cryptocurrencies, it seems only natural to use them a source of making massive transactions instead of using regular cryptos. Since the price of normal cryptocurrencies can fluctuate massively in a matter of minutes, they can’t be trusted as a reliable source of making payments.
Stablecoins also hold a very important ground between the world of cryptos and the traditional financial market. People in the traditional market who do not want to get involved with cryptos in any way owing to the uncertainty that they provide can make use of stablecoins just for the technology lying underneath as the prices do not fluctuate very often. On the other, people in the crypto arena that want transparency and trust in the traditional financial framework can use stablecoins to carry out their monetary activities.
Stablecoins form a bridge between the world of cryptos and fiat. This can help increase both the adoption of cryptocurrencies and improve the financial workflows of the fiat world using the revolutionary technology of blockchain. Although stablecoins have their peg to fiat and other commodities and are not pure decentralized cryptocurrencies, their usage makes the most sense for big corporations and companies.