A Stablecoin Issue: A Kind Of Magic
This year one of the main approaches of blockchain and crypto world is a stable coin. Not a surprise, as a result of the rapid correction of cryptocurrency, people have become extremely wary of the ideas of investing in crypto. They prefer a more predictable market, more price stability. In NODR business model the stability of cryptocurrency is a key point.
When the first decentralized digital currency, a bitcoin, was released almost 10 years ago, a new revolutionary tokenomics, appeared. However, the question of its volatility and security was always very debatable. Someone consider cryptocurrency a blessing, someone a curse. But, if the security issue leads us to the blockchain technology to be transparent, the volatility remains a rather large barrier to entry, especially in light of a slowing in adoption, it brings back to light the growing phenomenon of Stablecoins, — reported Forbes contributor Darryn Pollock. “The foundation for the rise Stablecoins — the search for price stability. They also come with the ease of transferability and cost-efficiency, which we all like with regards to crypto assets”, — also stated in this Forbes article by Antoni Trenchev of Nexo, a cryptocurrency loans service.
In this article we are going to discuss the meaning of stablecoins, how do they differ from traditional cryptocurrencies, and why they are the answer to the cryptocurrency main issue of volatility.
Not stable still
At the end of 2018, after the crypto crush (from December 2017 there were dramatic bitcoin price rise and fall $19,783 -> $5,500; Coincheck, Japan’s largest cryptocurrency OTC market, was hacked; Compromised Binance API keys were used to execute irregular trades; Facebook, Google, and Twitter banned advertisements for initial coin offerings (ICO) and token sales) many crypto enthusiasts, businessmen, and politicians, all affiliates, are agitated by the unstable situation on the exchanges and in online society, and many of them see the solution to the crypto volatility issue in stable cryptocurrency.
If the cryptocurrency by its price does not tighten to another good or service, it may be speculated or its rise or fall may be unpredictable. Nowadays lots of young investors, businessman and politicians look at digital currencies and technologies powered with blockchain as an answer to many deep-rooted problems such as bureaucracy and corruption. Meanwhile, these technologies jeopardize world banking system attempting to shift people capitals from the governmental control, as some may concern. Apparently, cryptocurrency and blockchain have much more possibilities for a business of almost-everything when introducing vital and supported stable coin as a reward in a particular marketplace of a product or a service.
How to make a coin stable
The subject of stable coins is in high demand now as crypto adopters begun to understand the ambiguity and non-integrity of existed cryptocurrencies in the beginning of 2019. The main problem of other-than-stable coins is volatility, no one could ever solve using traditional methods of the price stabilizing. The focus was always on cryptocurrency as a mean of payment so the way it was treated was “not quite web money but something like this”. At NODR we consider any cryptocurrency, be it in a form of native coins or tokens, as a monetary unit, supported by the demand for a certain service and by the price of that service on the market. This makes a value of a token and this is the reason for this token to become a stable one.
Value of a token
Value of the token is a special “magic”. For any non-stable coin, its value is based only on the belief of the holders that it costs this or that much. For different holders, there can be different beliefs. Someone thinks that the coin is overvalued (and this holder sells), someone thinks that it is undervalued (and this holder buys). The reason for such digital currency market to operate is a faith. Not quite economically, isn’t it?
A stable coin idea is an attempt to replace faith in the rise or the fall of a coin with something concrete. Literally to tie the price of a coin to something stable to make it stable too.
The idea is very controversial, yet very logical. From one point of view, the blockchain was originally created as a “thing-in-itself” and any offer to tie it not to its mechanisms will be considered as scam. From another point of view, if coins tent to be considered as web money we have to remember, that money can not exist without the function of price stabilization in accordance to something (for example, the gold).
In theory, the price for the stable coin can be set in two ways:
— Declarative. Just tie the price to $1 and call it USDT. People must sell and buy a coin for $1, no matter what”.
— Through the money supply. If the price goes up, there will be more tokens to make the price go down. And vice versa.
In practice, to minimize volatility the value of a stable coin can be pegged to currency, or to exchange traded commodities (such as precious metals or industrial metals). Stablecoins backed by currencies or commodities directly are said to be centralized, whereas those leveraging other cryptocurrencies are referred to as decentralized, stated on Wiki Stable coin page. However, it is not that simple. Tether, the largest stable coin by market capitalization, has faced accusations of being unable to provide audits for their reserves while continually printing millions; many have attributed their unverifiable creation of new coins to Bitcoin’s rise in price in 2017.
NODR Stable Coin
However, the example of Tether was quite a good try. We at NODR also have all the tools to design a working marketplace and introduce our stable coin. In our case, tokens will be backed by the service of decentralized and distributed traffic delivery network, powered by blockchain, which will provide the possibility to pay users a certain amount of digital currency in exchange for the work of their nodes. Besides, we focus mostly on the product and the marketplace to make it useful and keep it in a high demand for those who don’t really care whether blockchain is involved in the delivering value to marketplace users or not, but care of a having trustworthy easy-to-use and profitable application for people like you and me.
