Why Many Experts Are Prioritizing Stablecoins Over Bitcoins As An Investment
Today, the universe of Stablecoins has exceeded $40 billion in supply. Furthermore, in January 2021, monthly transaction volumes exceeded $200 billion.
For all the headlines commanded by Bitcoin And Ethereuym, the real stories of Stablecoin have been covered up. However, seeing how Stablecoins is gaining ground, experts believe that Stablecoin will scale faster than Cryptocurrencies in terms of everyday financial services.
Stablecoins are emerging rapidly. Thanks to the private sector companies complying with the government’s request and coming up with Stablecoins like Diem (Facebook backed).
If Stablecoin has sparked your interest and wants to get your hands on some of the Stablecoin, visit the bitcoin circuit site.
What Are Stablecoins?
As the name suggests, Stablecoins are the digital currency with price stability. They have been able to do so because they are backed with assets and fiat currencies.
The global market cap for Stablecoins is more than $80 billion, which is almost 3.3% of the total market cap of Cryptocurrency.
The better way to understand Stablecoin is to see them as a newly enhanced banking system supported with Blockchain technology. After all, Stablecoins were invented to bring in the benefits of Cryptocurrencies and the stability of fiat currencies.
With Stablecoin, cross-border payments have become easier while maintaining liquidity, transparency, and security.
Why Use Stablecoins?
The answer is pretty straightforward – Stablecoins are not subjected to extreme price volatility. Cryptocurrency like Bitcoin has always been known for its dynamic nature, immutability, transparency, and decentralization.
On the other hand, Stablecoin can leverage all the benefits of Cryptocurrency at the cost of having a single entity controlling the network.
Furthermore, Stablecoins seem quite promising with the new emerging decentralized applications. This can help individuals and companies make international payments with ease.
Types Of Stablecoins
Unlike Cryptocurrencies, where there are no types, Stablecoins do. The types mostly vary depending on what type of asset is backing the Stablecoin.
1. Crypto-backed Stablecoin
As the name itself defines, Crypto-backed Stablecoin is usually backed by decentralized cryptocurrencies like Bitcoin and Ethereum.
2. Commodity-Backed Stablecoin
A commodity-backed Stablecoin is backed with tangible assets like gold, oil reserved, or equity shares. The value of these types of stable coins depends on the value of the commodity.
3. Fiat Collateralized Stablecoin
Fiat collateralized coins are the most common type of Stablecoin. These Stablecoins are backed with fiat currencies like US dollars.
4. Algo-Based Stablecoin
Algo-based is the most complex Stablecoin. They do not have collateral and rely solely on smart contracts to adjust the supply and maintain a stable market value.
Make Money With Stablecoins
Most people use Stablecoin to earn passive income. At the same time, some make a serious career out of the Stablecoin market. As Stablecoin is backed with tangible assets, it makes it easier for the investors to hold them for a longer period without worrying about its price too much.
Here are a few ways in which you can use Stablecoins to make money.
- Earn Interest: This is the simplest way to make money out of stable coin investment. Open an account, buy some Stablecoins and enjoy daily interest on your holdings.
- Lend Your Stablecoin: Another way of making money is by lending your digital assets with a rate of interest.
- Stake Your Stablecoin: You can earn money by the process called staking. Staking is where you maintain the flow of the Blockchain network on certain assets.
The Future Of Stablecoin
Stablecoin has gained a lot of traction in the market. Perhaps, this is due to the price stability linked with the collateral reserves. Stablecoins are often used as a base currency and are commonly used on Defi (Decentralised Finance) platform.
Defi platform is a platform typically operating on the Distributed Ledger Technology. They decentralize the regulation of the currency for all the stakeholders.
The modern global financial economy is looking for a payment method that is instant, secure, and controlled by a single authority. In that case, Stablecoins might be a better option than Cryptocurrencies.
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