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All this time, Stablecoins have been becoming increasingly popular. Let’s check out some of the most commonly used cases for this group of assets to see how technological advances are changing how we handle money.
Stablecoin offers us the goodies of the blockchain while simultaneously avoiding the volatile nature of crypto. Examples of the blockchain goodies mentioned above are instant settlement, transparency, privacy, and lower transaction costs.
On/Off Ramps
This is the platform one uses to buy and access the cryptocurrency ecosystem (On-ramps), and it is also used to convert electronic assets to normal currencies (Off-ramps), e.g., US dollars, Euros, and Pounds. Stablecoin links normal finance and decentralized finance, thus assisting in the transition into the new financial system (decentralized finance).
Payments
Stablecoin can be used to make quick P2P (peer-to-peer) payments and transactions. Even very small transactions can be run automatically via smart contracts, thus reducing human intervention.
Also, Stablecoins are very liquid and are quite easy to exchange for the usual currency on numerous, exchanges. As an alternative, some users use their Stablecoin debit cards to buy goods directly with Stablecoins.
Remittance
Stablecoins also facilitate international payments and remittances. This completely gets rid of the intervention of third-party institutions and lowers the cost of exchange rates and transfer charges. These transactions are verified on the blockchain, thus reducing the transaction period from days to a few minutes. Also, unlike other digital assets, Stablecoin significantly lowers the problem of volatility in remittances.
Market Liquidity
Another use case for Stablecoins is providing liquidity for cryptocurrency traders. They aid in the speedy entry and exit of trading positions for traders while protecting their portfolios from unanticipated risks. While traders wait for trading opportunities, this group of digital assets helps to keep the value of their assets without having to off-ramp into fiat currencies.
Savings
This is usually overlooked, but it is a very common use case for Stablecoin. Since Stablecoins are designed to have a constant value, they don’t have vesting periods, so users can very easily move money in and out of wallets. Therefore, Stablecoins can be saved, and users can spend them only when needed.
Staking and Lending
Staking and lending Stablecoins supply institutions, exchanges, and even individuals with liquidity. Dissimilar to Ethereum, USDC, and USDT (Stablecoins) do not use a proof-of-stake consensus system, which makes staking on this platform similar to a money market deposit.
What the Future Holds for Stablecoins
The inherent beneficial features (anonymity, programmability, and instant payments) have made blockchain technology the driving force and have been pivotal to the faster adoption of cryptocurrency.
Moving on, we might witness Stablecoins remodeling how we use and hold money. Also, cryptocurrency investments can anticipate development in these areas, such as microtransaction facilitations, tokenized markets, and payment systems. As many of these use cases will likely see adoption in years to come, the central bank’s digital currency is also being introduced to function as an alternative to Stablecoins. The Central Bank Digital currency (CBDC) is an alternative to Stablecoin that offers solutions to many of the problems of Stablecoins, such as regulatory problems, operational risks, security, and liquidity.
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