Crypto Sector’s Next Big Thing: Stablecoin Guarantees Steady Crypto Inflow
- Written by TechXO Team
- Category: BlockChain
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Another type of cryptocurrency is on the rise. Stablecoin, as the name itself suggests, are an exciting type of cryptocurrencies which are stable, and are linked to real-world assets such as fiat including USD, EUR, CNY, and JPY. Stablecoins are stable unlike the price of Bitcoin or Ethereum which keeps varying in USD every time.
As studied by Blockchain, from $1.4 billion last year, the total value of stablecoins has more than doubled to $3 billion.
Crypto had faced many drawbacks, but most of them have been solved with technological innovations. But even with the advancement of technology, the volatility of the currencies has not yet been solved. Stablecoins arose with the goal of controlling the volatility of currencies. This stability is what many crypto-investors and participants want in an asset which they want to invest. Businesses are finding it elusive to accept cryptocurrencies due to its volatility.
Cryptos are rarely used to buy products and services due to their swinging price. It radically rises up or crashes down reliant on the current speculative interest. Imagine, you are a spa owner, and you have received crypto in return for your service and receive $50 or it. Then, the crypto depreciates tomorrow at 20 percent and now your $50 is now equivalent to $40.
Another example is Bitcoin, the world’s first and most popular cryptocurrency, multiplied by 15 in 2017 before plummeting to 80% in 14 months.
The volatility of cryptocurrencies could all transform with stablecoins as stated by Head of Research at Blockchain Garrick Hilleman. “They [stablecoins] can solve real problems,” Hilleman told AFP.
A decrease in volatility would allow consumers to buy simple products like a cup of coffee, according to the Co-founder of Cryptocurrency Consultants Delphi Digital Tom Shaughnessy.
US investment banking giant JP Morgan Chase launched its own cryptocurrency known as the JPM coin last month. This digital coin is similar to Bitcoin and Ethereum but with more advancement designed to make instantaneous payments using blockchain technology.
JPM became the first bank to create and successfully test cryptocurrency representing a fiat currency, the US dollar. A JPM coin will always value equivalent to one US dollar. It is a stable coin which is linked against the US dollar. JPM coins can be transferred immediately to another person’s account and redeemed for the equivalent amount of US dollars. This technology significantly reduces settlement time.
The test successfully moved money between a JP Morgan account and a client account with the new technology.
Gold stablecoin is another craze of stablecoin that is backed by gold, instead of a dollar or other currency. It combines the innovative capabilities of blockchain technology using gold that provides a more convenient solution to the highly volatile cryptocurrency market. With gold-backed stablecoin, gold can now be tokenized and can now be sent to anyone in this world without breaking a bar of gold into pieces. The future looks promising for gold stablecoins.
As of today, there are 26 stablecoins existing. According to a blockchain study, there are 28 more types of stablecoins are in development and are expected to launch this 2019.
Tether, the predominant type of stablecoin with regard to tokens in circulation and value, is alike JPM coin which will always be worth a dollar. It represents over 95% of trading volume in nonvolatile cryptocurrency and 69% of their total value.
As reported by data provider Coinmarketcap, among all cryptocurrency, the tether is 2nd only to bitcoin in everyday traded volumes and 7th in terms of valuation.
Hilleman emphasized that stablecoins should not be seen as direct competitors. But instead, stablecoins should be seen as complementing cryptocurrencies.
“Bitcoin may come to be seen as digital gold”, Hilleman said, a place to store value in time. Stablecoins, on the other hand, would serve to trade.