Week 6: Stablecoins

Some key facts & figures

• There are around 200 stablecoins.
• Total market cap circ. 20 billion euros at the time of writing.
• Many use cases.
• Gateway to the crypto ecosystem for many.

What are stablecoins?

Stablecoins are cryptocurrencies where the price is pegged to a reference asset.

A reference asset can be either; fiat money (euro, dollar etc.), commodities like precious metals, a cryptocurrency with a large market cap (BTC or ETH) or an algorithm.

By design, they reduce volatility relative to unpegged crypto’s like BTC which are known for their volatility.

Why are stablecoins important?

Stablecoins bridge the worlds of cryptocurrency & everyday fiat currencies. The combination of traditional-asset stability with digital-asset flexibility has proven to be very popular.

With a stablecoin like USDC for example, it is backed 1:1 by the USD which is held in attested accounts which are also audited to verify reserves.

• Stablecoins are open, global & accessible to anyone on the internet, 24/7.
• They’re fast, cheap & secure to transmit.
• They’re digitally native to the Internet & programmable.

Use-cases

Minimize volatility: Cryptocurrencies like BTC & ETH fluctuate a lot. Stablecoins can protect against this especially when the market drops suddenly.

Trade or save assets: A bank account isn’t needed to hold stablecoins & they’re easy to transfer. Their value can be sent easily around the globe, including to places where fiat currencies may be hard to obtain or where the local currency is unstable.?

Earn interest: Can be higher than a traditional bank. Staking of stablecoins can produce attractive yield but there are a lot of scams so doing due diligence is essential.

Transfer money cheaply anywhere in the world: People have sent as much as a million euros worth of stablecoins across the world with transfer fees of less than a euro and in seconds. This gives established companies in this space direct and fierce competition.

Final words

The real-world uses of stablecoins are starting to become clearer to many and it is evident that these are and will continue to become a viable bridge for people to enter the cryptocurrency space and build confidence.

For example, the ability to convert an amount of euros to a stablecoin of your choice, send it across the world in seconds on the said blockchain all for a low fee is a game changer for many. The tried, tested & expensive ways of sending money around the world is quickly coming to an end. The friction that has lined the pockets of these third parties for years will give way to savings & increased speed & traceability for users.

Disclaimer

This series of newsletters complements the weekly blocklunch45 sessions and is for educational purposes only as my mission is to educate as many business leaders, entrepreneurs and consultants as possible about the miriad of amazing use-cases of blockchain. It is not financial advice in any shape or form and the examples given are to illustrate the content only.

If as a result, participants and / or readers decide to invest on any of the companies or brand names mentioned, then that is entirely at their own risk. Please do your own research (DYOR).

If you are interested in joining the blocklunch sessions then please email me at [email protected].

Jeremy.