Going cashless is nothing new. In fact, in much of the world, digital payment tools like debit and credit cards, chip and pin, WeChat, and contactless payments have replaced the cash economy. However, a new cashless payment method is finding its footing—Stablecoins. With this, consumers can purchase anything they want as easily and quickly as using social media.
What makes stablecoins appealing is how they make the transaction process fast and efficient through your mobile phone. Stablecoins have grown in fame in cryptocurrency and traditional banking in recent years. With their ability to provide stability, transparency, and speed, stablecoins will soon become the standard for remittance, payments, and cross-border transactions.
What is a stablecoin?
A stablecoin is a digital currency linked to a fiat currency, such as the U.S. dollar or the Euro. It is a practical and viable option for activities involving payments on a blockchain network for large and small amounts. Imagine it as a digital wallet that is secure, fast, and inexpensive, with the functionality of fiat money. Continue reading to learn why stablecoins quickly become payment alternatives and redefine cashless payments. Below is a quick explanation of the types of stablecoin to help fresh investors know them.
Types of stablecoins
Fiat collateral Stablecoins
Fiat-collateralized stablecoins are the most popular and simplest stablecoin construction. They are backed by fiat currency (government-issued currency) such as USD and EUR as collateral to supply a specific number of digital coins. The value of the stablecoin will remain stable as long as the economy of the country’s fiat currency remains stable.
Commodity-collateralized Stablecoins
Commodity-collateralized stablecoins are backed by assets such as gold and other precious metals, oil, and real estate. This sort of stablecoin uses a tangible asset with real worth; some individuals hold them because they have the potential to appreciate it over time.
Non-collateralized Stablecoins
This concept, algorithmic stablecoins, has no collateral or reserve. To ensure price stability, it is instead collateralized by a self-sustaining economic structure, such as a central bank. As the demand for stablecoins develops, new tokens are issued to replenish the stablecoin supply.
This approach is a decentralized stablecoin in its purest form because it is fully independent and not backed by any asset. Even if the value of a fiat currency varies or the cryptocurrency market falls, this approach will remain stable and persist.
Crypto-collateralized Stablecoins
This sort of stablecoin, as the name implies, is backed by other digital currencies, such as Ethereum (ETH) or other tokens. This model employs paired coin systems. Because the danger of price swings is greater for one cryptocurrency than for a collection of cryptocurrencies, crypto-backed stablecoins are sometimes supported by more than one token for optimum risk distribution.
Why is stablecoin popular?
There are several reasons why people use stablecoins as their payment method. Below are five reasons why stablecoin is popular.
It minimizes volatility: The value of cryptocurrencies like Bitcoin and Ether fluctuates significantly — sometimes by the minute. An asset pegged to a more stable currency can give buyers and sellers certainty that the value of their tokens won’t rise or crash unpredictably in the near future.
Safekeeping: Stablecoins are a popular option for unbanked or underbanked persons. Without a bank account, connecting to the digital economy or properly holding your money can be difficult. People who rely on cash can utilize Bitcoin ATMs to convert their money into a stablecoin, which can then be safely stored on the blockchain or used to make online payments.
International Remittances: Stablecoins are perfect for making everyday payments or transferring money to loved ones because they are a cryptocurrency designed to retain their value. They can be particularly advantageous for migrant workers who want to enjoy cryptocurrencies’ fast, cost-effective money transfers while maintaining the stable and robust value of the U.S. dollar.
DeFi: Stablecoins are often used in crypto loans issued through decentralized finance (DeFi) protocols. Stablecoins are a prevalent choice for those taking advantage of crypto loans because of their enduring value and ability to convert into fiat currency easily.
Cheap and fast transaction: People have sent as much as a million dollars’ worth of USDC with less than a dollar transfer fee. Stablecoin payments are hailed as the industry’s future since they considerably minimize the previously mentioned frictions of speed, costs, and fraud. While the consumer experiences few of these issues, merchants’ decision to accept stablecoin payments on high-speed, low-cost blockchains has the potential to be a big driver of enhanced efficiency.
In conclusion, stablecoins have arrived and are making their presence felt. They will, sooner or later, alter people’s perceptions of instant payments. Even when the world’s largest cryptocurrencies fall and struggle to recover, stablecoins and the blockchain technology they are founded on can endure and thrive because they are the closest thing the world has to fiat currency and commodities.
Where to sell Stablecoins and get paid
With Africa getting better accustomed with crypto and blockchain technology, more safe platforms are being created for the sales of cryptocurrency and one of them is Dart Africa. On Dart Africa, you can sell Stablecoins for naira or cedis and get paid immediately. The platform is easy and safe and has a responsive customer service. To create an account on the platform, you only need a valid email address and phone number. Visit the Dart Africa website or download the mobile app to get started.
