Stablecoins: The Future of Digital Currency

by ImmuneBytes
stablecoin, all you need to know

Bitcoins have become old news in the Blockchain world. What’s taking the front stage is Stablecoins. So, what exactly are Stablecoins? What do they do? Where are they used? If you don’t have the answers to these questions, continue reading. Our team will explain everything you need to know about Stablecoins. 

Stablecoins are cryptocurrencies that have their price pegged to a stable asset or commodity. Most are backed by fiat i.e. government-issued currency. However, some may be pegged to the price of commodities such as gold, or even other cryptocurrencies.

Stablecoins are more or less made to mimic the traditional currencies in the crypto-world. Possessing the best of both worlds – offering the features of cryptocurrency yet overcoming the volatility that it suffers from, Stablecoins are on their way to drive blockchain adoption.

Stablecoins homogenize the transparency, security, and privacy of a digital asset with the stability of the traditional currency.

For example, Tether(USDT), created in 2014, is the first-ever Stablecoin. Each USDT token is redeemable for $1, held under custody by Tether Limited. As of 2020, it is the most widely integrated digital-to-fiat currency today. 

Stablecoins are only as stable as the assets they are pegged to. Price swings may happen if the asset they are backed by is volatile though, by nature, they are usually pegged to stable ones. Some of the best-known stablecoins include Tether (USDT), TrueUSD (TUSD), Gemini dollar (GUSD), DAI (Maker), and USD coin by Circle and Coinbase (USDC).

Tether

$10.3 billion

USD Coin

$1.10 billion

Paxos

$245.24 million

True USD

$137.05 million

DAI

$50.16 million

Top 5 popular Stabecoins with the market cap

Where are Stablecoins Used?

“We’ve seen Bitcoin fall dramatically from a high of nearly $20,000 this time last year to something currently around $3,400. Naturally, that sort of unpredictability makes it absolutely understandable that many users of cryptocurrency would want to look for something with more stability.” Dr. Greig Paul,  blockchain and cryptocurrency academic, University of Strathclyde 

Stablecoins have a wide variety of use cases in- 

  • Remittances
  • Commerce and Transactional purposes
  • Trading
  • An alternative to traditional currency deposit and withdrawal methods
  • Store of value for long-term hedging

How Safe are Stablecoins?

Stablecoins are safe as long as confidence losses do not happen. Backed stablecoins are subject to the same volatility and risk associated with the backing asset. Stablecoins must be pegged in a decentralized manner, to keep them safe from predation, but if kept in a central vault, they may be robbed, or suffer a loss of confidence.

Other than that, getting an audit for your stablecoin smart contract is the way to steer clear from any hacks that are hurled your way. We at ImmuneBytes are happy to help you with that. Contact us to get your Stablecoin audited.

Highlights

2020 has been a promising year for stablecoins, which experienced smashing transaction volumes of more than $90 billion in Q1 alone. They are also growing to be the harbinger of the DeFi sector. While it took five years for the market to reach a supply of 6 billion, it took just four months, from March to July, for that supply to reach the 12 billion mark.

In June 2020, the amount of value transferred using stablecoins exceeded the amount transferred using BTC for the first time.

The birth of stablecoins has also allowed governments and central banks to dive into decentralization. CBDCs or Central Bank Digital Currencies have the power to bring financial inclusion, enhanced transparency, and traceability. Countries like China, England, and the USA are currently exploring technology to launch their own digital currencies.

Stablecoins are here, and they are here to stay. There are strong expectations that they’ll be the breakthrough that the crypto industry has been waiting for. Stablecoins can pave the way for cryptocurrency to become mainstream and facilitate cheaper, faster, and more transparent transactions – broadening the growth area.

FAQs

Are there any risks while transacting in stablecoins?

  • Stablecoin may be deemed to be evidence of a debt that is put in circulation as money.
  • There is a risk that fiat-collateralized stablecoins which are pegged to the value of a currency could be considered as ‘e-money’ under the PS Act.
  • In the case of no harmonized rules around stablecoins regulatory frameworks creates legal risks and development hurdles for stablecoins
  • Stablecoins may also carry potential risks concerning how any reserve assets backing the stablecoin are held and maintained.

Why do I need to get an Audit for stablecoin?

  • Stable coins are audited so that investors are confident.
  • Auditing stablecoins frequently, adds to its price stability.
  • To find reliable information on how the associated collateral is held.

How can Stablecoins be audited?

A comprehensive assessment of the stablecoin smart contract is done by our team at ImmuneBytes to find out all the vulnerabilities that could potentially result in a loss and resolve them to secure them for you. The value of a stablecoin is compromised without a concise and regularly updated audit system in place. Don’t risk it, Connect with us, and get your Audit now.

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