What Future Does Stablecoin Have With Crypto Payments
Stablecoins have been the bedrock of the cryptocurrency market since it was first launched in 2014. It was basically an easy concept for creating a cryptocurrency that maintained a stable price during market price falls. A stablecoin is typically pegged to an underlying asset and in the case of many stablecoins, it is usually pegged to the US dollar and other fiat currencies which is 1:1.
Why were stablecoins created?
The market needed an asset that can be used as a store of monetary value for entering and exiting (on and off ramps) DeFi ecosystems. The asset will act as a medium of exchange — its value should remain stable over time.
In today’s market the three top stablecoins backed by cash reserves are, USDT, USDC and BUSD. USDT has the largest market capitalization at $68.5 billion and with other stablecoins have become systemically important to the crypto industry and also have now been subjected to tighter regulatory oversight.
There are also other forms of stablecoins like the algorithmic stablecoin which was made popular with TerraUSD (UST). Algorithmic stablecoins are typically a kind of stablecoin that uses an algorithm to maintain a consistent value. These algorithms usually link two coins and then adjust their price depending on the supply and demand of investors but are not backed by the asset, however have the same value with that asset.
Stablecoins for Payment
If we are to factor in the real world usage of stablecoins, they key areas to consider are:
Faster and Affordable Remittances
Remittances through stablecoins have become one of the easiest payment methods away from the slow and outdated process of the SWIFT network, and other cross-border payments systems like MoneyGram, WesterUnion, WorldRemit, etc. Stablecoins offer cheaper transfer of fiat backed currency without the need of long queues at the bank and 2-3 working days.
Devaluation Hedge for Local Currencies
For many developing nations and third world countries, stablecoins offer an opportunity to hedge against local currency devaluation and sometimes economic instability and oftentimes it is used as a means of payment between two parties in the country.
What is the next phase?
With the possibility of stablecoin regulation by top economies globally it is very likely that more stablecoins will be accepted for payments and trade in the real world economy. However, there are already numerous companies and businesses accepting stablecoin payments in USDT, USDC, BUSD, etc.
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