Cryptocurrencies are volatile. For everything they want to be, this is a big issue – especially if, say, Bitcoin was to replace the dollar as a universal currency. It’s somewhat impossible to do with such a fluctuating value. It’s for that same reason the United States dropped a gold-backed dollar so long ago.
That volatility also makes it quite difficult for cryptocurrencies to be a reliable store of value. Something like gold works as one due to its relative stability. Sure, it ranges up and down and has unpredictable moments, but nothing close to the relative lows and highs of cryptocurrency.
Fortunately, this is where stablecoins come in. There are all types of stablecoins tied to various physical assets. We have stablecoins tied to gold, often offered on a gold-backed crypto exchange. There are stablecoins tied to more traditional assets like the dollar and other fiat currencies. These are more often offered on cryptocurrency exchanges like Binance and such.
How can they solve crypto’s problems? In various ways.
How Stablecoins Can Solve Cryptocurrency Problems
For one, stablecoins are just that: stable. They’re tied to the value of a non-fluctuating asset, like the United States dollar or something similar. If produced correctly, these assets are simply a digital version of the physical asset they’re representing.
Thanks to this, these assets are much easier to buy, sell, trade, and otherwise store. If you convert your savings to, say, Tether, they can be moved anywhere in the world and exchanged with any fiat. Only, this can be done almost instantly, and with next to no fees as well.
Stablecoins are also compatible with most cryptocurrencies. This makes it even easier to get into the cryptocurrency space, considering this accessibility.
So, stablecoins essentially solve volatility and store of value. They’re a fantastic way to circumvent more traditional problems faced by Bitcoin and other assets. On top of this, these stable assets are solving international transfer times and fees faced by standard fiat.
From here, stablecoins also make crypto lending and borrowing much simpler. Lending and borrowing can be done automatically, and investors can easily earn interest on their staked funds. All staking can be done almost instantly, with funds distributed automatically, thanks to smart contracts. There’s no need for a bank or other third-party to take a ton of fees.
With all of this problem-solving, it’s time to examine some great stablecoins.
Speaking of investor accessibility, Gold Coin is a gold-backed stablecoin that allows anyone to invest in gold. First off, you can invest in fractional amounts of gold thanks to this asset. That, and the cryptocurrency enables you to invest anonymously and without the high fees traditionally associated with gold.
There’s no need for an intermediary. All of your Gold Coin are stored in an ERC-20 compatible wallet. From there, you can choose to redeem your assets for physical bullion if you’d so prefer. Of course, this requires you to reveal your identity, but it should be worth it if you want gold in your hands.
Proving its backing, Gold Coin has monthly auditors checking the supply. This way, you can be sure the gold you invest in actually exists.
USDC is Coinbase’s own stablecoin. The asset is tied to the US dollar on a 1:1 ratio, backed by a mix of cash and Treasury bonds. Also, users can earn USDC for holding their stablecoin within the platform. Essentially, they’re earning interest on a savings account, in a way.
Otherwise, USDC is a fantastic way to hold your funds on an exchange, prepping them to be traded for another asset as you please.
Now you’re aware of just how useful stablecoins can really be. These backed assets aren’t necessarily a next step for cryptocurrencies, rather a side step. They serve a different purpose and are quite successful at what they do. Hopefully, you find a stablecoin that works for your financial situation.
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