Stablecoin are becoming more and more popular. Their massive popularity began last year, and since then the amount of projects has only continued to increase. However, people interested in cryptocurrencies and blockchain technology have little understanding of the concept of “stablecoins” and the idea they carry.
What are stablecoins
Stablecoins are cryptocurrencies that have a stable price that is not directed to dryness like the advantage of traditional cryptocurrencies. This property is managed by linking the rate of stablecoins to stable assets, for example, fiat currencies (US dollars, euros), physical assets (oil, gold).
However, today many developers are working to remove the dependence of stablecoins on traditional assets, since they contradict the fundamental property of cryptocurrencies – decentralization. Thus, the concept of linking the rate of stablecoins to the CPI (consumer value index), an indicator that reflects the average price of a basket of consumer advantages and settings, is recommended.
Successful cryptocurrencies before-mentioned as Ethereum and Bitcoin are extremely resilient, which prevents them from being generally applied as full-fledged averages of pay. One of the principal purposes for the production of stablecoins is exactly the concept of applying them as a method of performing regular household amounts. An ideal stablecoin should fulfill three purposes:
- Act as a means of exchange (lets you buy and trade assets and services quickly, without doing barter).
- Be a method of storing assets (allows you to hold profits for a long time without losing their value).
- Used as a piece of the statement (allows you to measure and compare the cost of advantages and help).
Which stablecoin to choose
Now, there are 226 safest stablecoin projects reported, most of them have not yet launched. According to Blockchain.com, the benefit of a stable coin this year is $ 3 billion, which is 2 times higher than a year ago. Among the stablecoins, in accession to Libra and JPM, one can note the launch at the end of June of the blockchain of the South Korean corporation Kakao with its native cryptocurrency Kakao Klay and support for other cryptoassets.
The principal thing is that the choice depends on the goal you are pursuing. If you are interested in a stablecoin as a method of pay, then outwardly a doubt, a stablecoin is the best choice, for example, the good old Tether. If you intend to get income from changes in the exchange rate of the coin, then there is no point in purchasing Libra or JPM Coin for this.
A regular token is more suitable for investments. The only condition is the project. must be promising, and the founding team must be reliable.
When choosing a stablecoin, one should keep in mind a fact from a study by Blockdata: only 30% of the total number of declared stablecoins are viable. It is also helpful to pay attention to key conditions such as:
- The presence of a third-party audit to confirm the safety of the coin;
- Stablecoin security margin;
- Ecosystem stability;
- Redemption;
- Potential risks, etc.
Stablecoins are a promising direction in the growth of cryptocurrencies, because they will help to realize one of the various important tasks of “capital of the XXI century” – to turn them into a full-fledged center of debt. So far, none of the teams have managed to create a stablecoin that would gain universal recognition and popularity. Perhaps the reason is that, so far, none of the coins created have met the high requirements for decentralization, security, and a solid technical foundation. However, time will tell whether a project will appear in the world of blockchain and cryptocurrencies that will meet all the requirements of a high-quality and promising stablecoin.
