How crypto volatility has given rise to stablecoins

The great crypto experiment hasn’t all been unicorns and rainbows so far. Short term successes have been countered by equally-quick crashes and while progress has been made in the development of crypto to make it a more stable investment, it is enthusiasm over the potential of the underlying blockchain technology that has driven growth, rather than trust in crypto itself.

And the public has felt it as well. Bitcoin is famous for its ups and downs and media coverage has focused on the rare super-success story or the people who could lose it all with a bad turn in the market. This perception has contributed to low adoption rates and has forced crypto entrepreneurs to think of new ways to make crypto more reliable.

In fact, the industry is in a huge push in that direction at this very moment. In 2017, a rapid increase in the number of ICOs saw an unprecedented flow of wealth into the crypto market, but volatility fed by scammers, the poor security and a lack of solid regulation conspired to humble investors and in 2018, took down many ICOs along with the value and market capitalization of almost all cryptocurrencies.

Now the industry is bouncing back and aiming towards greater mass adoption with the proliferation of stablecoins. These coins usually represent quantities of real-world assets, making their worth more tangible and far less volatile than the utility tokens used by the struggling ICOs.

But why do we need stablecoins at all if they simply represent the value of assets that can also be traded physically or with fiat currency? Because stablecoins still bring the biggest benefits of crypto to the market though, one could argue, without realizing its full transformative potential.

Utility tokens have allowed entrepreneurs to dream big, create completely new ecosystems and support ambitious applications of blockchain technology. Stablecoins, on the other hand, are almost like a compromise between the economic model everyone is familiar with and the one made possible by blockchain and cryptocurrencies.

While stablecoins are created by centralized entities, the end product — the coin itself — maintains the qualities of decentralization and transparency that make blockchain so revolutionary while cutting out the institutional middlemen present in fiat transactions. Stablecoins may be a form of compromise, but they still make everything cheaper and quicker while increasing liquidity.

Stablecoins started gaining traction in the latter half of 2018 and their popularity has only been matched by a quick increase of the number on offer. eToroX has released a set of fiat stablecoins with 10 on offer so far, pegged to the U.S. Dollar, the Euro, the Swiss Franc and more. There are now stablecoins pegged to all kinds of commodities like gold and crude oil, and there are even currency-backed stablecoins that rely on the dollar, among other fiat currencies. Which one will prove to be the most reliable? Only time will tell, and crypto traders will likely vote with their feet, making one or a few more popular than the others.

These recent developments appear to be a positive step forward for the crypto industry, building the trust and security needed to fuel mass adoption.