The Rise of Stablecoins: Are They the Crypto Market's Future?

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While the rest of the crypto market has been stagnant for quite some time, market analysts are noticing the growing spread, and the rise in the number of transactions involving stablecoins in blockchain. Experts at ICOBox evaluated the pros and cons of these "stable coins" and came up with their conclusion regarding their chances to replace bitcoin.

According to the data available for the research, in just three short months four major stablecoins – USD Coin (USDC), True USD (TUSD), Paxos (PAX) and Gemini Dollar (GUSD) – shot past the $5 billion mark in terms of the volume of blockchain transactions, and between September and November the number of transactions went up by 1,032%. These are colossal figures, especially considering the overall downward trend in the market.

The secret to stablecoins's growing popularity lies in their primary quality built right into their name – these coins are stable. They are tied to the value of a specific tangible asset (such as traditional currencies, gold, or oil) in the expectation that in turn they will maintain their value over time. This is a useful tool for traders wishing to protect their profits from the volatility of other crypto currencies without having to convert them into fiat. However, the very concept of "stability" here is somewhat relative, because the rate is tied to the value of some other asset. Which brings up a number of important issues.

Today's stablecoins come in several flavors: coins backed by fiat money, coins backed by cryptocurrencies, and unsecured coins.

The first type is the simplest and easiest to understand. A digital coin is linked to a fiat currency at the rate of 1:1, with reserve fiat funds kept in the bank, and the cryptocurrency holders can exchange their crypto for cash at any time. But what about decentralization? Where is transparency? Forget it! In this model, users have to completely trust the central authority holding the fiat reserves. When dealing with this type of stablecoin, one can sit out the next cryptocurrency rally, but this is really one of its few advantages. Moreover, there is no guarantee that the underlying fiat currency will not drop in value, and when you divest of your stablecoins you will be left with less than when you first got in – and these are just objective market realities.

Read the details in the article of Coinidol dot com, the world blockchain news outlet: https://coinidol.com/rise-of-stablecoins-are-they-crypto-markets-future/