Imagine a cryptocurrency whose price is always very close to 1 dollar , this is a stablecoin, whose literal translation is “stable currency”. You combine blockchain transparency and security with fiat currency stability.
This technology can be used for any other type of ballast: gold, Euros, oil and even the S & P500 index. What guarantees this parity is the purchase of the real asset on behalf of the administrator responsible for issuing stablecoin .
Dollar stablecoin
Let's start with the simplest case, the dollar. The customer makes the $ 2,000 bank transfer to the stablecoin administrator . In return, this administrator issues 2,000 tokens and sends them to the customer's wallet.
It is necessary to remember that this token has no obligation to trade for 1 dollar. Your quote will fluctuate on exchanges, although it will always be close to this value. If for some reason it deviates too much from parity, the arbitrators will probably run to seek this gain, bringing the currency back to around 1 dollar.
The guarantee that the number of tokens in circulation is equal to the amount of dollars in custody, or kept, is the responsibility of the stablecoin administrator . Presenting audited balance sheets helps to bring transparency, but these procedures vary according to each issuer.
Advantages of stablecoin
Why buy a cryptocurrency that has no upside potential? There are three basic cases in which its usefulness and practicality help a lot in everyday life:
1. Strong currency: We need to remember that many people live in countries where the local currency is weaker than the dollar (hello, Brazil!), Either because of inflation or limitations on transactions imposed by the government. In this case, stablecoin functions merely as a virtual dollar, thus avoiding the need to transact by bank accounts or by traditional means, typically complex and expensive.
2. Balance stopped: Let's imagine a scenario where the customer has chosen to sell his Bitcoins, however he does not want to leave the value stopped at the exchange or transfer it to his bank account. Stablecoin is an excellent option, as it brings the possibility of self-custody, that is, it allows the customer to store it in a wallet of their responsibility.
3. Transfer between exchanges: The transfer of values between exchanges has always been possible in the case of Bitcoin and other cryptocurrencies, but in fiduciary currency it was necessary to withdraw the amount, and then make a deposit at another exchange. Using stablecoins this process is much faster and cheaper.
Top stablecoins
The stablecoins seeking parity with the dollar dominate the scene, led by the oldest of them, the Tether USD (USDT), with more than 6.5 billion issued. Second is USDC, by the American brokerage Coinbase, considered by experts as one of the safest in the market. There is also a growth in cryptocurrencies that seek parity with gold, although they are still incipient.
Follows the ranking of stablecoins in dollars, according to the website stablecoinstats.com
Remember that each one has its own characteristics in terms of regulation and form of distribution to the market. The stablecoin DAI, for example, has backed by Ethereum (ETH) and other criptomoedas, and its parity with the dollar achieved by an automatic rebalancing mechanism.
How to get a stablecoin?
Although it is possible to purchase directly from the issuer, a dollar current account is required for this, in addition to meeting the requirements of KYC - Know your Customer - and PLD - Prevention of Money Laundering.
The most practical way ends up being through exchanges , either exchanging fiat currency (reais, euros, dollars) for the desired stablecoin , or selling other cryptocurrencies in exchange for stablecoin.
Some international exchanges do not directly enter and exit fiduciary currency amounts. Others require the use of a partner (gateway), which charges a fee for the transaction.
The Bitcoin Market, the leading volume exchange in Latin America, is in the process of bringing one of these market-leading dollar stablecoins to its customers. Follow our social networks and email shots to be informed of the release date.
Day-to-day use
Most stablecoins function as a token of the Ethereum network, in the ERC-20 standard. In this way, it can be stored in any wallet - wallet - that works with such tokens.
The customer gains an option to store this stablecoin on their own , although the Bitcoin Market continues to offer the possibility of keeping their cryptocurrencies free of charge, safe and encrypted in our custody, as we already do today.
If you want to send stablecoin or any other cryptocurrency directly from your Bitcoin Market account to another exchange or wallet, it is also possible. You should request the transfer of cryptocurrencies via the web platform, in the same way that you are already used to.
Are you in doubt about bitcoin and stablecoins transactions , how do addresses on the blockchain work, if it is possible to identify the sender or recipient, shipping fees and confirmations? Follow us in this other article .
Tokenization of money and assets
An irreversible trend in the market is the digitization, or tokenization , of fiat currencies, and even investments such as real estate, gold, fixed income securities, investment funds, precatories, among others.
The governments and Central Banks themselves understood the benefits of traceability, transparency, security and agility provided by blockchain and other governance processes that govern the different cryptocurrencies.
The launch of fiat currencies in this new format is a matter of time, and stablecoins show us that potential. The main challenge is the need for the public to get to know, use and trust the address system, wallets and seeds, the security keywords.
It is for this reason that the Bitcoin Market started out ahead and bet on the secondary market of alternative assets , starting with the precatory tokens and consortium tokens. Our entry into the stablecoin segment aims to provide more investment opportunities for our clients, bringing the benefits of blockchain and cryptocurrencies to traditional assets, with less volatility.
The use of stable coin technology can help pave way for other assets into Crypto world. I can't help but think about buying a Crypto asset pegged at the value of gold.