Ready to dip your toes with digital assets? Then keep it stable!
Were you one of the lucky few who purchased Bitcoin at the top of the market cycle ($20,000)? Wondered how you could have protected and asserted risk management due to volatility of the young cryptocurrency market? Interested in dipping your toes to invest or trade cryptocurrencies in a safe manner?
Well, I have the solution for you… Stablecoins! Yes, in simple terms; stablecoins are digital assets that are typically backed (1:1 ratio) by another asset for the intrinsic value, primarily USD (fiat). So, for every dollar you exchange for a stablecoin; that asset will be backed by that dollar and accounted for without fractional reserves!
You’re probably thinking, “What’s the big deal?”, doesn’t my financial institutions such as: banks, PayPal, Venmo and other monetary services track my money? The simple answer is, no! A digital representation of a dollar USD in your bank or other financial app doesn’t imply that you have ownership of that money. What that representation signifies is an IOU on a balance sheet, which may or may not be the real balance in real-time (see fractional reserves reference and think pending money transfers).
Now imagine; full ownership of that one dollar asset with a stablecoin (I’ll choose USDC as an example), within your cryptocurrency wallet and/or cryptocurrency exchange 24/7. Isn’t that powerful, transparent and more accurate of what digital money should be? With assets (cryptocurrencies) recorded on a ledger (using blockchain), everyone in the world can confirm the balances from addresses and track transactions more transparently.
If the world is going to adopt cryptocurrencies, then we should start with stablecoins. What’s also exciting, stablecoins can be backed by gold, real estate and other commodities, too. Major benefits for this provision is to ease newcomers into the new digital era, assist with trading, payments and processing as well provide market stability. The vast majority of the world have at least one cell phone per house hold, so utilizing apps to store, trade and exchange assets at your finger tip is the next step to #unbankyourself!
Finally, banks will still play a pivotal role as custodial services, but this new technology (blockchain) will force them to adopt to new changes as mentioned by Christine Lagarde, The president of the European Central Bank (ECB).
”In the case of new technologies — including digital currencies — that means being alert to risks in terms of financial stability, privacy or criminal activities, and ensuring appropriate regulation is in place to steer technology towards the public good. But it also means recognising the wider social benefits from innovation and allowing them space to develop.”
J.P. Morgan is quickly wrapping up their long awaited digital currency to promote and have other institutions transact funds and allow for liquidity in the banking sector. As you can see, governments, institutions and the private sector will be developing, integrating and utilizing these digital currencies soon!
After learning and researching further about stablecoins, you can “up” your game and “stake” (a techie term that means save or hold) your stablecoins in accounts or wallets to earn interest! Yes, there are many FinTech and cryptocurrency companies that will yield ROI that is 10 times better than what your bank can offer!
If you want to learn more about blockchain and cryptocurrencies, please follow, read and subscribe to the resources below. You can also start with a Coinbase account and earn $10 in Bitcoin with your first deposit.
Welcome to the financial revolution!
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