Stablecoin
A stable coin, as the name says, is a coin with a fixed price of a usual equivalent to $1.00. Different stable coins are back by different assets. Most of these stable coins issue by centralized parties except for Dai that will be further discussed in the Case Study of MakerDAO.
How does it work?
When a Stable coin is back by Fiat and pegged to USD, it means that every stable coin issue like GUSD, PAX or Tether issuer will have USD$1.00 in their centralized deposit. When you return the $1.00 stable coin, the stable coin is “burn” or removed from total supply.
Use of Stable Coin
The key use of stable coin is to lock the value of the crypto without having to move it into your local fiat currency. For example, when Etheruem was at $1,000 USD and if you would sell some of them for Gemini Dollar (GUSD) which is pegged to USD at $1.00, you would have locked that value. With the 1000 GUSD, you can buy 10 Ethereum at $100 each.
With Stable coin, you can use it as a medium of exchange to buy things that you would have to use your fiat in your daily life.
It can also be used as a global currency to protect wealth especially in countries like Venezuela.
The stable coin can also be built as the basis for a new financial ecosystem like crypto backed loan and global remittances that require long-term price stability to function.
There are more than 50 stable coins listed and on a weekly basis, I am approached by my peers who wish to launch their own stable coin. So, I won't be surprised if we have 100 stable coins by end of the year.
Tether is the most used stable coin with a market cap of 2billion and circulation of 4billion with credit service. It looks to me like Stable coin is another way of printing more money in the crypto market.
On top of that, there are more and more ways for us to purchase and liquidate BTC into Fiat easily via various channels.
Binance and NEXO, launch their credit card so that we can use our crypto.
Coinbase , Gemini allows us to get Bitcoin easily in USD.
Homiex allows us to get Bitcoin easily in SGD.
PundiX, getting 5000 merchants to use their POS to accept crypto.
You can liquidate BTC and ETH to FIAT easily with Crypto2cash that supports up to $5million per transaction with over 22 currencies. And I receive my deposit within 24hrs.
...and a lot more ways coming along.....
Do share what do you think about Stable coins? Do we really need it?
