Before we address why Stablecoin exist, we could make a brief introduction about what Stablecoin is. Stablecoin is a cryptocurrency minted on an exchange like other crypto coins. People could store their Stablecoins in their hot or cold wallets. For integrity, most Stablecoins are associated with their external reserves to support the stability of the Stablecoin. The fund could be a deposit of fiat currency, debt instruments, or commodities. The Stabelcoin entity owns a reserve with equal value to the Stablecoin on circulation. Any Stabelcoin holder should be able to change one Stablecoin for a dollar.
As we referred, the unpegging of the TerraUSD from the U.S. Dollar caused a catastrophic devaluation in its accompanying crypto, LUNA. Eventually, LUNA ended up being frozen in many significant exchanges. Other instabilities seem to occur in other stable coins as well.
However, no matter from the technological perspective or its use cases, stable coins are meant to be there, and they will be there. Stablecoins’ leveraged positions should be proportionally equal to their pegged liabilities. There are stablecoins, such as Terra named itself algorithmic stable coins, a sugar coat for a leveraged asset backing the stablecoin. The dark side of this stablecoin is that when the leverage cannot afford the liability of the stablecoins’ liability, the stablecoin crushes.
Autonomy Capital’s portfolio manager Epstein asserted, “We see emerging stablecoins all the time which claimed to be stable, but its balance sheet is not weighted as much as its liabilities.” One of Terra’s failures is pegging non-dollar reserve to the Terra, bearing a significant underlying risk.
A company named Circle runs USD coin, which uses authentic technology to back their stablecoin, rather than pegging to leverage. They use high-quality short-term paper as an asset to support the USDC token.
Epstein values stablecoins as digitized, fully market-backed monetary funds. There is a substantial value from the stablecoin, providing the digital fund with stable value. We assume that more stablecoins will occur in the market in the coming months. Despite its prevailing negative headlines recently, there is a vast market potential that offers potential growth for the stablecoin market.
Others claim that Terra’s collapse brings stricter market policies, and central banks may also issue their digital coins.
In pure essence, Stablecoins are designed to fulfill the increased global demand for money exchange. Stablecoin users do not have to turn to multiple international bank accounts to transfer their crypto assets to other friends. Stablecoins facilitate peer-to-peer transactions, reducing the need for third-party intermediaries.
Suppose you are a business owner in Tokyo who needs to transfer money to Mexico and China. In that case, you may open different accounts and turn to intermediary bank services to change your money to other currencies to pay those partners. However, during the process, those associated banks will skim a decent amount of money as their service fee. With Stabelcoins, we do not need that; we could change our fiats into Stabelcoins and pay to our partner with cryptos, which is easy and reduces a significant amount of money and time.
Privacy lovers particularly like Stablecoins, which enables them to avoid KYC terms widely used in the traditional bank system. KYC generally consists of your security information and ID, which undermines your privacy protection. A man from Texas can deposit his money on different wallets, and own Stabelcoins pegged to various fiats. He could have stable coins pegged to Yuan to pay the Chinese businessman who could receive crypto. Stablecoin will significantly reduce the service fee for exchanging process.
SuperEx is the first decentralized crypto exchange with its complete DAO community governance. SuperEX crypto exchange features thousands of tokens in its trading zone, enabling users to proceed with different tradings ranging from spot to leverage and derivatives. No KYC terms are the spotlight of the SuperEx exchange, which places ultimate protection and tight defense on user assets.
SuperEx official page: www.superex.com
Official telegram group: https://t.me/SuperExOfficial
Official email: http://business@superex.com/
Official Twitter page： SuperEx (@SuperExet) / Twitter
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