What are Stablecoinsawareness
The popularity of cryptocurrencies like Bitcoin and Ethereum has grown dramatically over the last two years, opening a new way to send money to millions of people. Stablecoins, which differ in multiple ways from Bitcoin and Ethereum, are a growing sector in the crypto industry. Here’s why stablecoins continue to gain traction.
Like other cryptocurrencies (link), stablecoins operate on a blockchain. A key difference, though, is that, unlike Bitcoin, which maintains value based on its limited supply and growing demand, the price of stablecoins is directly tied to a secondary asset, or stabilized by an algorithm. Stablecoins, like the USD Coin (USDC), for instance, are linked to the U.S. dollar. The value of USDC, therefore, is directly tied to the value of the dollar. For this reason, the price of USDC usually ranges from $0.99 to $1.00. Users who hold the coin are assured by the makers of USDC, Circle, that they can redeem their USDC for the equivalent number of U.S. dollars at any time. Using the Bitcoin Depot mobile app, you can swap any of your cryptocurrencies for stablecoins.
There are many other stablecoins tied to various assets. Here are a few of the most popular ones:
Tether (USDT)- tied to the U.S. dollar
Dai (DAI)- tied to the U.S. dollar
Statis Euro (EURS)- tied to the Euro
Digix Gold Token (DGX) - tied to the price of gold
FEI USD (FEI)- stabilized by an algorithm
The first stablecoins, BitUSD and NuBits were issued in 2014. Both are still active coins but have shed most of their initial value. Neither is tied directly to a fiat currency, like the U.S. dollar or Euro, though. The Tether coin has the largest circulating supply amongst stablecoins, with more than 82 billion USDT in the public’s hands. The Top 5 stablecoins, by market value, Tether, USD Coin, Binance USD, TerraUSD, and Dai, are all tied to the U.S. Dollar.
Why Use Stablecoins?
Stablecoin users might prefer asset-backed cryptocurrencies mainly because they know the value won’t fluctuate unlike with some other coins. Beyond that, there are several reasons why stablecoins have gained popularity in the market.
Minimize price shifts.Stablecoins, backed by secondary assets, can maintain a relatively consistent value.
Maintain digital assets.You don’t need to have a bank account to hold stablecoins, just a digital wallet like the one we offer on our Bitcoin Depot app (link).
Conveniently send money.With stablecoins, it’s fast and easy to send money within and across borders without the threat that it will lose significant value.
Cost-effective alternative.Some stablecoins can be sent or received for less than a U.S. penny which is more cost-effective than a bank wire.
Earn interest.With some stablecoins, users can deposit their digital currency into an exchange or decentralized finance platform and earn competitive interest rates.
The Future of Stablecoins
With the potential to be used as digital currency between households and businesses, stablecoins have garnered increased interest from the U.S. government. In late 2021, multiple government agencies released an interagency report addressing the history of stablecoins and recommending regulatory steps to lower financial risks for consumers. The report urges Congress to act and allow for regulators to broadly oversee the market operators in the growing crypto industry. President Biden recently signed an executive order instructing government agencies to examine and provide recommendations concerning the U.S. government’s potential role in the future of digital currencies.
Minimum price shits, fast transactions, and global reach are all reasons people use stablecoins as their preferred cryptocurrency. With the growing use of cryptocurrencies, these benefits will likely mean that stablecoins are here to stay. As more nations (link), companies, and people enthused by the ease of digital payments discover stablecoins, these digital coins might just become the preferred payment method of the future.
Right now, you can stop by any of our bitcoin ATM machines to buy your own digital currency just like you would at a cash ATM. With over 7000+ locations (link) across the U.S. and Canada, it’s easy to find a Bitcoin Depot ATM to use wherever you are. If you’re new to crypto, check out our user guide and videos (link) to learn more. You can also download our mobile app on the App Store or Google Play to send, receive, and store crypto through your mobile device.
April 21, 2022