In the last few years, there was a lot of noise around cryptocurrencies. Some people say that it’s a bubble which will burst in a few years, some say that it’s a MLM (multi level marketing) business, others are interested in the topic and understand basic concepts. Enthusiasts are only a small part of our society, with a decent understanding of the idea behind cryptocurrencies, believing in its application in everyday life. They even think that crypto will replace FIAT! This is tied to a separate phenomenon in the world of cryptocurrency: stablecoin. Is the idea of replacing FIAT with this type of crypto simply a fan-made joke about the hype surrounding new technology, or is it an actual prefiction with believable arguments? Let’s try to figure it out.
So, let’s start with the definitions. What is FIAT money? What is Stablecoin? FIAT money is just cash we use in our everyday life. It can be EUR, USD, GBP. The key fact is that they are backed by material resources (like, for example, gold) and their emission is done by national banks. Stablecoin is an electronic currency which correlates with FIAT money; for example, 1 USDT (Tether) coin is backed by 1 USD. Their main characteristic is a low volatility of FIAT currencies with large advantages of digital currencies. The best examples of stablecoins are USDT, USD Coin, True USD, EURS (STASIS EURS). They are created by developers, implemented by programmers and their “CEO” is a community which believes in this idea. There are also stablecoins that are backed by precious metals or natural resources.
So, are there any prerequisites? We will try to explain the vision behind them, see how stablecoins can be used, and why they are more useful than FIAT money:
Lower fees and fast transactions
The main problem with FIAT money is that the banks and commercial services serve operations with them in a “virtual environment”. Do you remember the last time you wanted to transfer funds to someone, but had to wait? In cases where both sides use different banks, you have to wait even an entire day! We live in “fast” times – you need to be able to do things “here and now”. If you want to send your money quick, you have to pay for express transfers, and lose additional funds with bank’s commission cut.
What’s more, if you want to send your money abroad, you have to pay an extra fee. Stablecoins are a great solution in such case! These were created by society for society. No commissions, no waiting time, you can receive everything here and now! Is it a dream? No, that’s the purpose of stablecoins! Besides, using stablecoins is an excellent opportunity for retail chains to start accepting new technologies. They can receive payments in BTC or USDT, which are better than USD, since there is no volatility involved and it’s easy to understand that 1000USDT is always 1000USD. We can use them for daily shopping and it’ll be better for both sides!
Usage by governments
Stablecoins are built on blockchain technology, which means that you can’t influence their system. You can’t hide, remove or change something. Every government borrows money from an international fund for national needs. But corruption is extremely common these days. So, with stablecoin it’s possible to have public addresses of all government institutions, allowing each citizen a look into every transaction and compare it to official declarations. It’s impossible to cheat when using Stablecoins.
There are a lot of different ways to invest your savings in corporations, startups, and even simple interesting projects. It can be a traditional venture investment when you need a middleman that should help you to solve all “paper” questions. Besides, a very popular feature that helps gather investors for your projects are crowdfunding platforms. Stablecoin is one more great instrument for making investments. You don’t need any lawyers, any paper contracts, sending stablecoins to the external wallet, you just sign a “smart contract”. So it’s possible to ignore a middleman and get investments directly from investors. It might help remove fees, be less time-consuming etc.
Decentralised bank services
Can you imagine a situation where you deposit your money in a traditional commercial bank, and then they announce that they went bankrupt? Such an important decision depends only on fickle thoughts of top-management. Probably, you don’t want to be dependent of someone’s actions and schemes, so stablecoin is an excellent solution in such case. Just remember – the primary goal of banks and other financial institutions is to make profits, but the main goal of the blockchain industry is to help society and make our lives more comfortable and more convenient. It’s a great idea to use decentralised organisations for providing you with a proper level of security.
Easy to embed in services using traditional FIAT money
It’s really hard to embed real FIAT Money to a service like Binance. You need permission to exchange a virtual currency to FIAT money. So, the best solution is to create crypto – stablecoin pairs to provide service. A lot of traders need to buy-sell cryptocurrency and exchange it to the one “stable” currency. Stablecoin is a perfect solution in this case. You can save your funds in them and wait for the best moment to buy something, and you can be sure that the value of these funds is not changeable. You need something stable, something that defies inflation. Something else is going on with Internet services. For example, it’s a decent alternative to use stablecoin when you want to make a bet right here, and now, so you can use stablecoins to withdraw funds at a crypto casino. Besides, on the market, there are many other available traditional services that use blockchain-based solutions.
We see that there’s a lot of areas where we can use stablecoins. But there are also some disadvantages. To use them in everyday life or, especially, in national institutions, the industry needs regulations. Additionally, there’s too many scam campaigns on the hype market, and it’s hard to distinguish fakes from an actual project with plans and a desire to support the project. The adaptation of this technology is a tough and lengthy process. It’s something new, unique and irregular. It’s hard to say that the use of this type of cryptocurrency will be ubiquitous. However, we see that more and more payment systems add stablecoins to their systems, and more and more online stores accept them as a payment method.
To sum it all up: stablecoins are a very fast, cheap and comfortable type of funds. If governments create deep regulations and conditions for using them, it will be possible to make the funds transfer process better. We can use these backed up tokens in different areas: bank transfers, investments in various projects, daily shopping and exchange/bet services, where we sometimes need fast transactions and a possibility to hold funds in something fast and stable, waiting for the best moment to invest.