Stablecoin is becoming increasingly popular. Their widespread popularity began last year, and since then, the number of projects has only increased. However, people involved in cryptocurrencies and blockchain technology have a poor understanding of the concept of “stablecoins” and the concept they carry.
What Are Stablecoins
Stablecoins are cryptocurrencies with a stable value and do not fluctuate like traditional cryptocurrencies. This asset is managed by linking the price of stablecoins and stable investments, such as fiat currencies (US dollar, euro) and physical assets (oil, gold).
However, many developers are working today to eliminate stablecoins’ dependence on traditional assets, as these contradict the underlying asset of cryptocurrencies, which is broadcasting. Therefore, it is recommended that the strategic price be linked to the CPI (Consumer Price Index), an indicator that reflects the average cost of a basket of benefits and the calculation of consumers.
The successful cryptocurrencies mentioned above, such as Ethereum and Bitcoin, are very stable, which does not allow them to be used to receive the average full salary. One of the main challenges in producing stablecoins is the right concept that can be applied to them to implement a common family currency. The ideal stablecoin should fulfil three goals:
- Act as a swap (allows you to buy and exchange goods and services without trading quickly).
- Be a way to store assets (allows you to keep profits for a long time without losing their value).
- Used as part of a report (allows you to measure and compare costs and benefits).
Which Stablecoin To Choose
There are currently 226 stable and secure projects registered, most of which have yet to be launched. According to Blockchain.com, stablecoin profits this year amounted to $3 billion, two times more than a year ago. Among the stablecoins joining Libra and JPM, you can notice the beginning of the end of June of the blockchain of the South Korean company Kakao, with its native cryptocurrency Kakao Klay and support for other crypto assets.
The most important thing is that the choice depends on your goal. If you are interested in a stablecoin as a payment method, then, without a doubt, a stablecoin is the finest choice, for example, the good old Tether. If you want to earn income from the change in the rate of coins, you do not need to buy Libra or JPM Coin.
The standard brand is suitable for investment. The only requirement is the project. It must be promising, and the founding team must be reliable.
When choosing a stablecoin, it is worth remembering from Blockdata research that only 30% of announced coins can be implemented. It is also helpful to pay attention to such vital situations as:
- Availability of third-party auditors to ensure the security of the coin;
- Stablecoin safety margin;
- Ecosystem stability;
- Redemption;
- Potential risks, etc.
Stablecoins are a promising direction for the growth of cryptocurrencies, as they will help to implement one of the essential functions of the “capital of the 21st century” – to become a full-fledged credit center. So far, none of the groups have managed to create a stable coin that will gain international recognition and popularity. Perhaps the reason is that none of the coins created have met the high requirements of decentralization, security, and a solid technical basis. However, time will tell whether a mission will appear in blockchain and cryptocurrencies that meet all high-quality requirements and prospects for stablecoins.