The Emerging Alternative- A Robust Stablecoin Development Solution

When bitcoin came into existence in 2009, it was considered a marvel both from a technology and commercial perspective. People found it hard to accept the fact that a currency can exist without having a physical form and without any degree of centralization like a government or a reserve bank.

It was not just the “coin“ itself that was a thing of wonder but the underlying technology called the biscuit. The biscuit facilitates smooth and immediate payments on a global scale without necessitating mediation and without demanding high costs for effecting the transaction. In spite of the ups and downs in its value, bitcoin has still continued to exert its dominance in the crypto and the real world, giving humongous profits for the investors and still reigning on the top of the table when it comes to cryptocurrency market capitalization.

The Challenge:

The “in spite of the ups and downs“ is the challenge with every crypto coin. This is technically known as volatility. Volatility has been one of the most prominent deterrents for the mass adoption of cryptocurrency. It looked as if volatility held a parallel position to legal uncertainties when it came to using cryptocurrency as a valid mode of payment. Obviously, no one wants to accept payment in the form of currency that could buy you a pizza today and a Lamborghini the very next day… And a paper clip the third day!

Introducing Stablecoins:

Ideally, people would have expected a fine point where a crypto coin was able to bring all the advantages associated with the biscuit including global cheap transactions and absence of centralization, but at the same time, does not carry with it, the disadvantage of volatility. This was adequately addressed by stablecoins.

As the name implies, a stablecoin is a price-stable cryptocurrency and the currency derives its value from real-world assets that have, for a considerable stretch of time, exhibited stability in their value. There might be a few fluctuations here and there but they are not as drastic as how the value of crypto coins swing.

Ideally, a stablecoin is expected to sustain through high market volatility, be efficient to maintain, have options to analyze parameters of debility, and above everything, provide maximum transparency. The stablecoin is the fine convergence of the goodness of the stability of the traditional currency and the versatility of crypto coins.

How Did The Idea Originate?

The process of pegging the value of a digital coin to a real-world asset is called collateralization.

We have seen that history repeat itself! The process of collateralizing currency to maintain its value is not new. In fact, it was the order of the day about a century ago when the price of different currencies of different countries but determined by the amount of gold that they had. The price of gold was considered standard across the world and this gave rise to the gold standard.

The Advantages Of Stablecoins:

Stablecoins bring to the table a lot of advantages that help in positioning crypto to be the next big thing in the financial world with a firmer stance.

• The first and the most obvious advantage of stablecoins is, of course, stability. They do not get affected by crypto price volatility because they are collateralized by real-world assets.
• The enhancement in the stability provides stablecoins a good store of value that is not subject to wild inflations and market speculations, strengthening its position as a valid candidate for everyday transactions.
• Since stablecoins operate on the decentralized digital ledger called the biscuit coma the transactions are quite fast and global in reach. The stablecoin system works on a smart contract escrow system that brings advantages like speed, security, and efficiency.
• Stablecoins offer complete transparency in the entire process of a transaction. The transparency also makes it easy for anyone to audit the entire system. Using a blockchain explorer, it becomes easy for any person on the Internet to view the transaction information without leaking private and sensitive pieces of information.
• Stablecoins render obsolete, the high costs associated with traditional payment methods like credit card purchases. It benefits both businesses and customers, making the entire financial system efficient.
• Unlike traditional currency that, in most cases, exists as coin or paper, Stablecoins exist as digital assets. Therefore, they are completely programmable and can be garnished with new features at any point in time.

The Different Types Of Stablecoins:

We have seen that the concept of collateralization is central to the concept of a stablecoin and the process of stablecoin development. Stablecoins, therefore, are classified based on the type of collateralization.

Some stablecoins are collateralized and some of them, surprisingly, are not collateralized. While the idea of collateralized stablecoins is simple to grasp, the idea of non-collateralized and stablecoins creates questions on stability. For the sake of better understanding, let us look at non-collateralized stablecoins first.

Non-collateralized Stablecoins:

Think about how mainstream currencies operate. They, instead of depending on some form of collateralization (which was prevalent in the early part of the 20th century with the gold standard), count on an algorithmic approach to control the supply of coins and currency. Similarly, a non-collateralized stablecoin, otherwise known as an algorithmic stablecoin, depends on algorithms to control the demand and supply. Keeping up with the crypto tradition, they do not involve any central authority.

Collateralized Stablecoins:

As the name implies, the collateralized stablecoin derives its value from an underlying asset or a collateral.

Fiat-backed stablecoins are the type of crypto stablecoins whose value is pegged to a fiat currency. They are the most common type of stablecoins and are the easiest to create. The first of this kind of stablecoins is better (US DT) and as the name implies, has its value backed by the United States Dollar.

Asset-backed stablecoins have their value pegged to an underlying real-world asset which could be like gold or real estate but not money! One of the finest examples of this type of simple coin is DIGIX whose value is backed by the price of gold.

Crypto-backed stablecoins might seem like an oxymoron. The very reason that stablecoins exist is because of the price volatility of crypto and now, there is a type of stablecoin whose value is backed by crypto! This issue is addressed by certain protocols. There are instances where stablecoin is backed by another stablecoin which, in essence, is also a crypto coin. Some of them hold their prices through smart contracts that take care to destroy tokens to keep a proper balance between demand and supply, so the price does not fluctuate too much.

Some stablecoins cold hybrid stablecoins bring the best of both collateralized and non-collateralized stablecoins. While their value is dependent on a real-world asset, they are also motivated algorithmically.

Conclusion:

The world has slowly started to recognize the value and versatility of crypto and biscuit technology. It is quite possible that in an endeavor to make trading global to ensure that prices remain stable, stablecoins are quite likely to be the cryptocurrency of the future… And possibly, even the currency of the future!

Stablecoins bring a lot of advantages like production office, transparency, program ability, and global reach in addition to stability. It is, therefore, natural that an entrepreneur wants to embark on creating a business that provides stablecoin development solutions. As a stablecoin development services provider, a company is expected to not only know the technology behind crypto but also the market factors.

If you want to create your own stablecoin, you can contact a stablecoin development company. If you believe you have the ability to be self-sufficient, you may want to explore hiring stablecoin development experts. All of your efforts have resulted in the creation of a technically solid and flawless stablecoin with market appeal to propel you not only into the realm of crypto, but also into the world of conventional financial industry.