In this article, we will deliver a complete introduction to the Stablecoin, and consider why it is emerging and certainly had been one of the most important occurrences in crypto world. They have been introduced together with the release of altcoins and the launch of bitcoin futures. Stablecoins allow a simple and currently controversial solution to the common problem of digital currency holders. To eliminate fluctuations. In a market where the price of your asset is constantly changing, you can buy and keep it without experiencing any redundancy. And you still can benefit the small fees for transactions.
What is Stablecoin?
In order to know what stablecoin is, you shall understand its functioning well. A stablecoin is a cryptocurrency that is pegged to a stable asset such as Fiat currencies or Gold. For many particularly mostly traders, stablecoins such as Tether or TrueUSD are similar to an escape boat. In fact, in high fluctuations, closing a trade whether with profit or loss, they can exchange their assets to stablecoins. However, the counterparts mention that they rely on Fiat money as a source of stability, and this contradicts the true philosophy of cryptocurrencies.
There are currently 34 stablecoins in the market, which proves high performance of these currencies for users. The market size of these currencies, or the amount of capitals invested in them, is about $ 5.21 billion, which is a significant number. In fact, 2.67% of the total capital of crypto market is allocated to this sector. But their daily transactions are much higher, about $ 18 billion a day.
Stable coin support
To know what a stablecoin is, we need to know the problematic history of the Tether. Last year, this digital currency has become the market leader in stablecoin world. It has received some commentary on its potential presence in manipulating cryptographic markets in price crashes in December 2017 to January 2018.
Tether always claims that it is endorsed by the USD. Especially when they continue to print $ 250 m monthly without having transparency. The most apparent clue is that tether is the digitalized asset of FED, however has not been regulated. By using the monetary printing method, the BTC Price Pump and the cryptocurrency price bobbled, in the December 2017.
The Gemini Dollar (GUSD) also claims to be pegged 1 to 1 with the US dollar, but what sets it apart from Tether and other stablecoins is their emphasis on transparency and compliance. US regulators such as New York State Department of Financial Services Director Maria Volvo, have confirmed the launch of the coin.
“These approvals show that companies can make changes and adhere to strong compliance standards in a robust government regulatory framework that protects approved entities and consumers.” – Maria
Despite the increased transparency associated with a supervised stablecoin, there are some obvious weaknesses for governments involved in the process. For example, Gemini can deactivate GUSD at any time, which means that Gemini can freeze any account and can deactivate all coins.
There is no doubt that the stablecoins must have a place in the cryptographic space. They provide a bridge between the world of Fiat and cryptocurrencies, as well as a storage space for investors and traders to temporarily escape the widespread instability of the cryptographic markets. However, one has to worry that users of cryptocurrencies are not as dependent on the stablecoins as they should be, and their lack of support makes them likely to fall. Finally, if stablecoins want to remain as a focal point in the cryptographic space, the best way to deal with them is in a regulatory framework that still allows for a great deal of decentralization and censorship.
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