Register for real-time alerts, custom portfolio, and market movers
The main advantage of stablecoins is that they combine the benefits of cryptocurrency with the stability and reliability of traditional currencies, making them an attractive option for investors looking for reliable and fast payment systems.
This main benefit makes stablecoin useful for a number of purposes. Stablecoins also enable quick peer-to-peer transactions while lowering the cost of the process. It also eliminates the cost of currency exchange, and the fact that, though it is a cryptocurrency, it does not have the volatile nature of crypto assets makes it gain growing acceptance among investors and organizations.
Stablecoins are not to be mistaken for digital fiat money. They are not the same. While one is the digital format of traditional money, the other is a cryptocurrency, and it bridges the gap between fiat currency and cryptocurrency.
Here are some benefits of stablecoins for investors:
Speedy Settlement
The traditional fiat currency system is frequently overburdened with additional services. These extra fees don’t really add any value. In addition, using third-party services frequently increases transaction processing times.
Stablecoins, on the other hand, enable transactions to be settled very instantly. They operate around the clock without the need for external transaction verification thanks to their decentralized blockchain networks and smart contract technologies.
Transaction expenses are significantly reduced when third-party services are dropped. In fact, as of the first quarter of 2021, the average stablecoin transaction cost is 98% less expensive than the average cross-border payment cost.
Privacy
Fiat currency is weak in the area of protecting the privacy of business transactions. This is where stablecoin is strong. Stablecoin offers better privacy as it keeps the user anonymous, thereby protecting the privacy of the stablecoin holder and reducing the possibility of fraud and identity theft.
More Transparent
The traditional currency is not as transparent as the stablecoin. This lack of transparency is what usually causes inflation and instability in the economy. Stablecoin, on the other hand, can be audited in real-time. Issues and disagreements are readily handled because anyone may access transfer-related data by utilizing a public key. Although stablecoin offers better transparency, the identities of its users remain anonymous.
Some Common Uses of Stablecoin
• On-ramps/Off-ramps
Through the on-ramps, you enter the crypto space as you convert your fiat currency to crypto. Through off-ramps, you reverse the process.
• Payments
With stablecoins, you perform a fast peer-to-peer transaction. Also, stablecoins through smart contract programs make microtransactions very easy, thus eliminating the need for manual intervention, which can result in extra charges if it were to be through traditional means.
Also, stablecoins are quite liquid. They can be quickly exchanged for fiat. Users have the flexibility to buy things through their cryptocurrency debit card. This is made possible through stablecoins.
• Remittances
Cross-border payments and remittances are both possible with stablecoin. This possibility removes the need for an agency to facilitate the process and also eliminates the exchange rate cost. The transaction time has been reduced from days to minutes thanks to the innovation of blockchain technology.
• Market Liquidity
Stablecoin also provides liquidity for cryptocurrency traders. On exchanges, stablecoins can be one of the two currencies that make up a trading pair. They allow traders to enter and exit positions quickly without exposing their portfolios to unwelcome dangers.
Stablecoins provide traders with a hiding place to keep the value of their assets safe during crypto storms while they wait for the next big opportunity. They can do this without having to ramp-off up their use of fiat currencies.
• Savings
Stablecoins can also be held as savings. Also, users can easily and freely transfer money into and out of wallets, saving and spending when necessary because there is no vesting or lock-in period.
Stablecoins serve as high-yield savings accounts for investors who may not want to go into crypto trading. The interest rates on this type of account are usually higher than the traditional ones.
• Lending and Staking
As of February 2023, the total value of $24,500,000,000 was locked in stablecoins. Stablecoin has brought lending and liquidity provision to a whole new level. Staking on platforms like the USDT or USDC does not require proof-of-stake consensus like that of the Ethereum network. This one looks more like the money market.
• Gaming
Nearly 30% of the decentralized applications available on the market are designed for gaming. In actuality, the gaming sector is another that is ready to incorporate stablecoins. Stablecoins make it possible for gaming projects to monetize in-game currency. Therefore, it is possible for players to buy, sell, and earn digital currencies.
Learn from market wizards: Books to take your trading to the next level.
