What are stablecoins and why do we need them?
While most of us who follow the crypto scene have heard the term stablecoin, it’s worth taking the time to focus on the full meaning behind this buzz word. So, what are stablecoins? Think of stablecoins as an island in the middle of uncharted waters, of which most people are unaware how deep they run or in which direction they flow. While it may be simplistic, this metaphor helps us understand the basic need and purpose for stablecoins. As the name suggests, stablecoins represent a much safer and more reliable stepping stone — an island on which many will stay and inhabit before moving on to other shores.
The consensus is growing: stablecoins are the future of crypto and an important piece of the puzzle that will lead to mass adoption. While utility tokens and cryptocurrencies have shown the world the potential of blockchain and crypto as a whole, stablecoins are helping bridge the gap between this new technology (and way of thinking) and the old.
First and foremost, stablecoins play an important role in the crypto environment. While cryptocurrencies and utility tokens create completely new ecosystems of wealth, stablecoins bring the benefits of blockchain and digitalization to traditional market economics. This system generates new liquidity and upgrades the traditional financial system that we are used to. It is a way to integrate the old and new currencies together, and in many ways, this is what blockchain was invented for.
While true for every new market, volatility is still one of the biggest challenges this industry will have to overcome before anyone can expect to bring about mass adoption. High volatility breeds speculation and creates a high degree of uncertainty. We all witnessed the market turbulence of past years, which resulted in the spreading of a lot of FUD. This is exactly where stablecoins come in. They are the metaphorical island and crutches for newcomers and traditional institutions alike.
Furthermore, stablecoins are also needed to bridge the gap between a fiat and credit-based market on one hand, and blockchain market on the other. For people to be able to use and understand blockchain, they need to experience how useful it really is. What better way to do this than by digitizing assets they already have, making it quicker and safer to trade in those assets? People also need to begin trusting this new technology, and stablecoins are free of the volatility still inherent in crypto-based innovations.
This is just a surface-level preview for the many applications, purposes and different forms of stablecoins out there so stay tuned for more in-depth blogs and analyses. Follow us on Twitter for all the latest updates, share from your experience, and join the conversation.
