What are stablecoins and where are they used?

[zakiyatasnim]

Bitcoin seems like a very attractive but risky asset. However, there is a safer alternative – a stablecoin. It has all the advantages of a cryptocurrency, while its price is stable.



Participants in the financial services sector have already shown interest in the digital asset: JPMorgan has launched its own cryptocurrency, and Facebook's Libra project will appear on the market in the spring of 2021.

There are now at least 200 stablecoins in existence, some in circulation and others in development. Two currencies pegged to the US dollar, Paxos Standard (PAX) and Gemini Dollar (GUSD), are already approved and regulated by the New York State Department of Financial Services.

At the end of 2020, the total value of stablecoins had increased by 300% compared to the previous year and exceeded $20 billion. JPMorgan has already launched its own cryptocurrency. According to a survey of central banks, two-thirds of respondents are actively studying the potential impact of stablecoins on financial stability.

What are stablecoins?
There are 180 currencies in the world recognized by the UN. They are used to purchase goods and services and, despite exchange rate fluctuations, inflation, and other factors, are generally stable. Thus, countries can use them for payments.

Stablecoins are digital currencies that mimic the properties of fiat (traditional) currencies. They are typically pegged to the dollar or euro (usually at a 1:1 ratio), gold, or other assets, including cryptocurrencies.

Why are stablecoins needed?
Their value is not as volatile as other digital coins. For example, in 2010, a programmer bought a pizza for 10,000 bitcoins (about $30 at the time). By 2018, the value of that order had grown to $28 million due to the huge increase in the price of bitcoin.

Because of this, some companies do not consider cryptocurrency a reliable means of payment.

Microsoft was the first to accept Bitcoin payments in 2014. However, in 2018, its acceptance was temporarily suspended due to price volatility.
The gaming platform Steam did the same.
A number of companies from Overstock to Shopify are now starting to accept bitcoins, but it is still far from widespread adoption.