The popularity of cryptocurrencies exploded towards the end of 2017 and one of the primary reasons happens to be the ICO-hype. However, quickly after that bull run, where most of the coins hit their all-time highs, the market dropped significantly and several altcoins could not even maintain half of their values. This unexpected move wrecked the portfolios for many people and it highlighted a significant need that has changed the entire landscape of the crypto industry – in order to make digital currencies a better and more practical store of “value”, there must be a type of asset that is not as volatile as mainstream cryptocurrencies.
Since then, we have seen dozens of popular stablecoins that are gaining popularity among the general public on the internet and have billions of dollars stored on them. Before we start digging into the topic, please be advised that technically, a stablecoin is a cryptocurrency. However, it is pegged to a real-world asset that allows it to maintain a “stable” value over time.
A few use cases that can benefit the most
Although stablecoins can be used in pretty much any niche, let’s explore some of the cases where they can bring a revolution and be a step ahead of cryptocurrencies.
Payments (including e-commerce and P2P transfers)
While using stablecoins to make purchases, there cannot be any mismatch of expectation between the merchant and consumer as the price is not affected by high volatility. For instance, if we take USDT as an example, if a merchant has advertised designer shoes on his website for USDT500, the value won’t fluctuate as it’s pegged to the USD and will remain USDT500 even if you decide to come back and pay after 10 hours (unless they change it).
Moreover, while making online payments, there can be a delay as well. In the case of cryptocurrencies, the value of the asset could fluctuate significantly from the time the transaction was initiated until the amount is received. Stablecoins are quite useful in this area as well as the transferred value won‘t change during the entire phase of the transaction.
Reliable store of value
If you earn, let’s say $5000 in Bitcoin, and you keep it in a secure wallet, you cannot guarantee whether its value would remain the same for several weeks or not. It could be 2X or it could even drop down to $1000.
Therefore, whether we talk about short or long runs, the most practical and reliable store of value is a stablecoin that does not change its value. Even if it fluctuates, the variance lies within a few decimal places.
Lending
Even the lending space has realized the importance of stablecoins and many institutional investors are practicing it at full scale. Please be advised that apart from loan providers, even debt investors
are gaining double interest rates, up to 15% per annum in plenty of cases.
The primary reason for this growth happens to be an immense demand for stablecoins in trading.
Therefore, it is quite evident that the popularity and adoption of stablecoins are growing at an exponential, and in the few years, we are most likely to see them eating up or at least competing with a major market currently occupied by fiat currencies.