Stablecoins: what they are and why you should absolutely know about them
In this article, we would like to talk to you about Stablecoin, thus addressing an edgy topic in the Blockchain ecosystem.
If you need more information about the blockchain ecosystem, I invite you to visit our article about it, click here.
So-called Stablecoins are neither meat nor fish, they are not traditional currency (FIAT) but neither are they cryptocurrencies.
Perhaps they are more a useful middle ground between the two worlds that are light years apart.
What is a Stablecoin?
Let’s go into the substance and analyse the purely technical aspects that characterise Stablecoins.
Essentially, a Stablecoin is a virtual currency pegged to the value of a traditional currency (or asset) and commonly regarded as a stable value.
Currently, the most stable, used and widespread traditional currency in world markets is the dollar, so the first Stablecoin could only be pegged to the dollar (pegged to usd).
So a sort of dollar clone, a promissory note, a means of emulating payment in dollars. With the guarantee (perhaps) that every single unit of Stablecoin corresponds to a reserve of as many dollars in a fund.
This describes the 1:1 peg between the Stablecoin and the underlying currency, but does not explain its implications with the Blockchain.
What do they have to do with the Blockchain?
These ‘stable currencies’ originate in the form of contracts (or smart contracts) developed initially on the Ethereum network, then multiplied on several chains for the most diverse uses.
In fact, as of today, there is not just one, but several, and not all of them are pegged to the dollar, more precisely today there are 134 of them source coinmarketcap.
Currently, the most popular Stablecoins are Tether (USDT), USD Coin (USDC) and Binance USD (BUSD).
They are therefore tokens programmed to follow a trend in the traditional reference currency.
As tokens can be developed by anyone and on any blockchain, however, it is not everyone’s cup of tea to create an adequate, secure and concrete guarantee fund.
Because while it is true that it is a virtual currency, it is equally true that the value it has is based on the trust that people place in the project.
Why were they born and what use are they?
The answer is simple, because the traditional market is slow, cumbersome and bureaucratically collapsed.
The purpose of Stablecoins is in fact mainly to make crypto transactions more agile.
From the crypto sector’s point of view, the fiat currency is a ball and chain that it cannot get rid of at the moment. So the obvious choice is to pick up the ball and run with it.
Thanks to this ploy, in fact, it is possible to exchange crypto for usd without going through an exchange, with one click directly into one’s wallet.
And you can send that money to the other side of the planet in a matter of moments, without the paleolithic international networks of SWIFT and SEPA.
DeFi has created this need in an ever-increasing way, it has accelerated the exchange process between currencies, cryptos, tokens, assets, NFTs by countless times.
If we wanted to make a technological comparison between Blockchain transactions (hence DeFi and Stablecoin) and traditional finance, it would be like comparing a horse pulling a cart with Elon Musk’s rockets.
This is to show the importance of this evolution and the disruptive dimension that this technological change will have on the daily habits of each of us.
Implications of this evolution
The need to incorporate traditional currencies into the Blockchain ecosystem, thus bringing them into DeFi and web3, was clear and obvious to all.
What was not expected were the implications of this.
The advent of Stablecoins has indeed created an immediate alert on the part of the institutions, a loss of power and control they exercise over the population on a daily basis.
Thus, an immediate invisible war has opened up, in which institutions are studying ways to thwart the system, the roots of which, however, are elusive.
This is demonstrated by all the vain attempts of the US Securities and Exchange Commission (SEC) to undermine the blockchain ecosystem in every way.
As well as the countless attempts to discredit or sabotage the various escrow funds that support these Stablecoins.
This is demonstrated by the fact that some large US giants had managed to get their paws into the honey pot and were immediately neutered by the SEC.
However, this not only shows that there is an invisible war, it also shows that there is a very strong desire to make full use of this technology.
Freedom denied, because if Amazon were to provide its shares freely on an unregulated crypto market, so would a token. Before long, there would be no need for exchanges and banks would have no excuse to continue to exist.
But you will see that technology will prevail, it will take years probably but it will come inexorably into all our lives and if you would like more information please do not hesitate to contact us.