What are stable coins?
Let’s define Stablecoins:
The word StableCoin alludes to a coin being stable. The key feature here is the word STABLE which provides the non-fluctuating equivalent value to an outside reference. This could be a currency, such as US Dollars or a Commodity, such as Gold or even another Cryptocurrency, such as Ethereum (in the case of Dai).
The outside asset is relatively more constant over the value held on the asset’s current Blockchain. The parity ratio always remains stable which explains the word ‘Stablecoin’.
Stability and Balance (Image Credit:____)
Stablecoins are a distinct form of digital asset that denotes the value of another currency or asset found outside of the asset’s blockchain.
An example:
For every 1 US$ in a user’s account, a digital equivalent of 1 Stable coin US$ is created. 1 stable coin dollar can always be exchanged for 1 US$. The 1:1 parity / peg always remains stable as the digital token can be redeemed any time for the actual currency. The issuer may choose to have the user deposits held by an independently audited, government approved third party custodian/escrow to provide transparency and assurance. However, this is discretionary & currently not mandatory.
Key advantages of Stablecoins over the traditional system
· Stablecoins provide a channel between the current financial markets and crypto-related ones by using the same reference pricing. Users are able to stay in the “digital sphere” while allowing for real-world assets to come online.
· A digital token (coin) with price stability gives stakeholders the prospect to interact with the digital ecosystem while avoiding the middlemen’s costly conversions. The investment experience remains entirely immutably digitised.
· The stability of the US Dollar or another asset/currency to which it is linked to stringently control the risk and participate in global monetary systems.
· It is faster, maintaining complete transparent settlement, friction less transfer, and use of blockchain technology.
Image Credit: ______
Stablecoins facilitates:
· Evolution of applications using blockchain technology by aiding as an intermediary between the digital and real world.
· Better access to the global financial system: anyone over internet can gain access to Stablecoins.
· Stablecoins are decentralized which transcends economic controls and policies.
· Investments and dividends become practical and highly secured.
· Payments through stablecoin are not subject to the volatility of cryptocurrencies.
Benefits of Stablecoins (image credit: ____)
Future vision:
· It’s a birth of new generation of currency where in the transactions will undoubtedly occur in digital form in a decentralized platform. Hence, enabling the transparency, immutability, security among the investors to transition from traditional financial services.
· Nearly, all type of Industries are venturing into Stablecoins — Banking, Agriculture, Healthcare, etc. And, in that Maritime Industry is not leaving behind as Shipping encapsulates 90% of the global trade.
