We can safely say that the hype about cryptocurrencies is pretty much over. The claims of Bitcoin revolutionizing the way we pay for things have turned out to be false – in its 12 years of existence, crypto still hasn’t banished fiat money from the financial world.
Volatility as a torment
The reason for this failure is the terrible volatility of cryptocurrencies, especially that of Bitcoin. Just one famous example will suffice to prove our point: in December 2017, Bitcoin’s price skyrocketed from $9,000 all the way to $20,000 and caused a massive uproar on the market. And at the end of the month, it came down to $12,000.
What this means is that whenever you want to get Bitcoins for storing value and then using them in various payments, it’s not going to be the most rational financial decision in the world. At one point, you have a certain value stored on the blockchain, yet in just a couple of minutes, that value can evaporate in thin air.
Volatility as a bliss
Now, this doesn’t necessarily imply the total uselessness of cryptocurrencies. The same volatility that renders cryptos unusable in everyday finances makes them an ideal trading asset. Traders from all over the world buy BTC, ETH, and other altcoins and in just a matter of minutes, they receive serious profits.
And that’s probably it; the only real use-case for cryptocurrencies – at least the one that has proved successful – is in trading. But the system they’re based on, the blockchain has so much potential even in regular finances.
Stablecoins as salvation for blockchain
You see, blockchain as a platform really is a revolutionary invention of the recent decade. The ability to engage in financial or other kinds of relations with other users and remain completely anonymous, as well as have those exchanges protected with strong encryption, is something that not many ledgers can promise. And while cryptocurrencies cannot thrive in the real-world finances, their younger “brethren” can.
Combining the benefits of crypto and cash
The idea of stablecoins is a relatively new concept. It was in 2014 that blockchain developers came up with the idea to create a currency that used all the incredible features of cryptocurrencies while still retaining the benefits of fiat money.
On the one hand, stablecoins are getting one of the most highly-encrypted digital ledgers in the industry. With the help of cryptography, every detail about the transaction is encrypted and is only accessible for the two sides participating in the process. Not only that, but the users are also anonymous and aren’t visible for the third-parties.
These features are actually crucial in many industries. In gambling, for example, the anonymity and the protection of funds is a must-have feature for any credible casino operator. That’s because they are often targets of cyber-attacks. And even if there’s not a hacker conspiracy brewed behind the curtains, the governments are still monitoring their citizens’ transactions and often put them in bad financial situations for engaging in gambling.
When casino users play new casino slots for real money, some governments and commercial banks tend to reduce their credit points and put them in a blacklist. That’s because they think those users will make bad financial decisions and undermine their bank accounts. Yet with blockchain-based payments, there’s no monitoring body to do that.
On the other hand, stablecoins still retain some of the benefits of fiat money. For instance, the above-mentioned volatility is greatly reduced when a stablecoin is tethered to a real currency (or a basket of currencies). This way, the central bank still has the power to stabilize the price on stablecoin and make it more usable for regular expenses.
Some of the popular stablecoin executions
There are quite a few stablecoins that have established themselves on the market. The first and most popular stablecoin is USD Tether. As the name suggests, this stablecoin is mainly tethered to the US dollar. However, the Tether basket also contains euro and Japanese yen. However, USDT also had its fair share of controversies (hacked accounts, hidden funds, etc.) over the previous years.
The next important stablecoins which is still in the works is called Libra. Libra was first announced in June 2019 by the Facebook CEO, Mark Zuckerberg. The stablecoin is mainly held by Facebook, yet it’s still not the only owner; the Libra Association, its main governing body, includes more than 20 large companies and they make all the decisions about the stablecoin.
However, like USDT, Libra has also been in the focus of regulators. But to be fair, it wasn’t so much about the stablecoin itself as it was about Facebook and its abuse of customer privacy.
Stablecoins have better chances than cryptos
All in all, one thing is quite apparent: in the battle for survival, stablecoins may have better chances of becoming a regular means of payment than cryptocurrencies. With its dualistic nature, stablecoins such as USDT allow users to use the advantages of both blockchain and regular money.
Photo by Marta Branco from Pexels
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