Decentrized Stabecoins: The Future of Money?
The world of finance has long been dominated by traditional fiduciary currencies, which are controlled and manipulated by governments. However, with the rise of technology and cryptocurrency blockchain, a new era of decentralized stables is emerging. In this article, we will deepen the concept of stablecoins, their benefits and why they may be the future of money.
What are Stablecoins?
A stablecoin is a digital asset that aims to maintain its value compared to a traditional fiduciary currency, such as the US dollar. Unlike cryptocurrencies such as bitcoin, which can float in value against other assets, stables are designed to be more reliable and predictable. This makes them an attractive option for investors, companies and individuals seeking stability and security in their financial transactions.
How do stables work?
The stables are usually created pairing a traditional currency with the underlying Blockchain of Ethereum (ETH) or other cryptocurrencies like EOS. The process involves the following steps:
- Pairing : A traditional currency is paired with a stablecoin, creating a new asset.
- Decentralization : Stablecoin is stored in a decentralized network, such as the IPFs, which allows it to be transferred and negotiated without depending on intermediaries such as banks or financial institutions.
- Tokenomics : An exclusive token is created for each stablecoin, with its own set of rules and governance structure.
Benefits of Stablecoins
Stablecoins offer various benefits on traditional coins:
- Increased stability : When using a decentralized network, stables may be more resistant to market fluctuations and economic instability.
- Improved safety : stable transactions are protected by encryption and distributed accounting technology (blockchain), making them more difficult to manipulate or hack.
- Accessibility : stables can easily be transferred and negotiated between users, regardless of their geographical location.
- Lower transaction costs : Value transfer through Stablecoin networks is generally faster and cheap than traditional coins.
Advantages about traditional currencies
The stables also have several advantages over traditional currencies:
- Liquidity : stables are usually more liquid and easy to buy or sell compared to traditional currencies.
- Lower transaction rates
: The transaction costs of the stables are typically lower than those of traditional currencies.
- Reduced risk : Using a decentralized network, stables reduce the risk of economic instability or currency devaluation.
Challenges and concerns
Although stablecoins show promises, there are several challenges and concerns that must be addressed:
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- Volatility risks : stables can be volatile due to changes in market conditions or technical problems with underlying blockchain.
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Real world examples
Several examples of the real world demonstrate the potential of stables:
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- USD Mouga (UST) : A new Stablecoin released by Coinbase, USD Coin aims to provide an alternative to US users seeking more stability than traditional coins.
- Makerdao (DAI) : Makerdao is a decentralized loan protocol supported by the US dollar, with stables as serving as guarantee and interest.