Imagine you have a bank account. To withdraw funds, you can either use a wallet or a debit card. Now apply the same analogy to cryptocurrency where your bank account is your holdings in a crypto asset and your debit card is a stablecoin that allows you to spend your USDT, USDC, or DAI.
That’s how stablecoins work, at least for now…
It’s a no-brainer that defi apps are getting more popular (and diverse) with each passing day. As people have realized that they can denominate their wealth in dollars and gain more value than traditional banks, everybody wants to hop on the bandwagon of ‘crypto gains’.
And where there’s growth, there’s competition. Fierce competition to be precise.
As people are flocking into the digital space, stablecoins have initiated a war amongst each other to become the primary, in-demand stablecoins in these digital spaces.
Each stablecoin right now has a fan base that tries to make sure to come in full force to ensure their stablecoins gain from the market share and be adopted as a primary stablecoin.
Recently, Binance – the world’s largest crypto exchange accounted to convert three stablecoins namely USDC, Pax Dollar, and True USD into Binance USD. Why this is happening is because stablecoins are heading towards a fierce competition.
But what does this really mean?
See the thing is that stablecoins are promising, not just because of their stability but because of their potential as well. There’s some serious money to be made in stablecoins. These stablecoins are tokens on various blockchains with a value that aligns with the value of a fiat currency, the US dollar in this case.
The reason behind the existence of stablecoins is simple – they are a lubricant of the crypto machine. With the time and transaction costs adding up, it takes a lot of resources to transact on different exchanges. If you want to hold Ethereum but want to transact with projects built on Sala, you need a crypto-to-crypto conversion facility, something stablecoins provide. Moving money in this case becomes convenient.
Over the last two years, stablecoins have soared in popularity.
The war bells
As the market is progressing towards more adoptions of crypto assets and use cases of it, it’s almost inevitable that there will be more conflict along the way.
Tether, an asset-backed cryptocurrency, has sort of monopolized the exchange liquidity since 2015. However, claims of Tether not having enough reserves also means that Tether has a chance of being replaced as one of the most popular stablecoins.
With Binance and Kucoin on the rise as decentralized options, we might even see their exponential growth and demand in DeFi and associated apps.
Similarly, in real-life scenarios, these stablecoins are also bound to be associated with payment infrastructures, fintech integrations, and lending, something which is a tough space to compete.
Even though there hasn’t been significant development on this front, it’s still almost inevitable that we can expect stablecoins to become a very important part of our daily financial forefront, especially because of their growing use cases and utilities.
However, what’s certain is that we at KoinX are determined to bring you the most important (and interesting) pieces of information every week. And what do we ask in return? Nothing except some ❤️ on Instagram and Twitter.