Seeing the potential carried by stablecoins, the social media giant Facebook is also reportedly launching its own stablecoin, backed by USD, for its subsidiary WhatsApp. As of December 2016, there were 1.74 billion mobile active users of the platform and the number has grown ever since. With Facebook adopting stablecoins, it could drive their large-scale adoption among the public. Stablecoins have been gaining much attention in the crypto world since they comply with the securities law. But are stablecoins really the future of cryptos? Here are some of the expert opinions.
There are two aspects that need to be looked at before any verdict can be given regarding stablecoins being better than regular cryptocurrency. On paper, the use of stablecoins makes the most sense for organizations and corporations which want to make large-scale transactions with minimum price fluctuation. But for investors and traders in the crypto space, volatility is of great value.
Stablecoins combine the best from both the crypto and fiat worlds. The trust and transparency offered by blockchain are coupled with the stability of fiat. Volatility is one of the major reasons why the general public holds back from entering the crypto world and using it as a source for their financial needs. Stablecoins eliminate this issue by providing a peg of cryptos to real-world currencies or commodities such as USD, Euro or gold.
Previously, while talking to BlockPublisher, the co-founder and chief operating officer of Ternio, Ian Kane, stated regarding this matter:
“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.”
“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.”
Although volatility becomes an issue for large-scale transactions, it is what makes the markets work by keeping traders excited. But volatility overall is bad. It makes the general public step away from this space as prices fluctuate in a matter of minutes. Payments and real-life usage become impossible owing to sudden price fluctuations. For building a layer of trust in general public and driving large-scale adoption, stablecoins carry extreme importance. They can help in real life which is their ultimate goal of the future.
Stablecoins essentially mirror fiat in the crypto space which means that the shortcomings associated with fiat currency are inherently transferred to the stablecoins . They are are pegged to a commodity or a currency and they are prone to problems like inflation. Although stablecoins might not conform to the core principles of cryptos by making a peg with traditional currencies or commodities, they hold the all-important key of driving mass adoption of cryptos: stability.
Rightfully summed up by Bohdan Kit, the CEO and Co-founder of Kattana, a professional crypto-trading terminal:
“…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”.