Benefits of Stable Cryptocurrencies
Crypto price fluctuations have become so commonplace that people have gotten used to it. The crypto market is like the sea where bigger ships are always looking for ways to take over smaller ships and amass wealth. However, crypto traders at the lower rung of the ladder found this situation highly damaging to their goals. So they found a way to curb the volatility prevailing in the crypto industry. Stable cryptocurrencies came to their rescue, which could serve as a reliable option during high market fluctuations.
There are mainly three kinds of asset-backed currencies. They employ various techniques to keep the funds of its users away and safe from market fluctuations. These three asset-backed currencies are-
- Fiat-backed cryptocurrencies
- Commodity-backed cryptocurrencies
- Cryptocurrency-backed assets
Most of them use the Ethereum network for functioning and ensure optimum security and transparency. Some of the most prominent asset-backed cryptocurrencies are-
It is a gold-backed asset and uses the Ethereum blockchain network. 1 DGX is equivalent to 1 gram of gold. Their transparency and audited document trail ensure that the amount of deposited gold is always equal to the amount of DGX tokens in circulation.
Gemini USD (GUSD)
The New York Trust Company regulates this fiat-backed cryptocurrency. It ensures that the ratio between USD and this cryptocurrency is always 1:1. It combines both online and offline strategies to mint new tokens.
True United States Dollar (TUSD)
TUSD is also a fiat-backed cryptocurrency that shares a 1:1 ratio with USD. an escrow bank account stores the funds. It has high liquidity and employs the Ethereum blockchain to spread it over 100 market platforms.
The Benefits of Stable Cryptocurrencies
We can’t describe either Bitcoin or any of the major altcoins as a convenient payment method. Combined with their volatility, this serves a major blow to the global adoption of cryptocurrencies. That is one of the main reasons why crypto enthusiasts developed asset-backed cryptocurrencies. Curbing the volatility of crypto coins was the biggest motivation behind launching cryptocurrencies. Consider providing your customer with an item that costs $1500. Now imagine that the market crashes and your income lessens by $500. Wouldn’t that be similar to daylight robbery?
Stable currencies allow merchants to trade without worrying about market volatility. Most people in the crypto world believe that if customers ever start using digital currencies to purchase items, they would do so by using currencies like TUSD, DGX.etc. Crypto traders also use these stable coins to prevent their earned incomes from crashing after the daily trading ends. Asset-backed cryptocurrencies have also enabled users to hold assets digitally. This was not possible earlier due to the physical nature of bullion.
Stable cryptocurrencies have played an instrumental role in regulating the highly volatile crypto market. As most stable currencies employ ERC Token mechanism, they offer easy usage and substantial support within exchanges, communities, and wallet offerings. All the transactions are processed under high-security levels. Also, the fees are affordable, unlike in Bitcoin. With reduced fears of a market crash, buyers and sellers can engage with each other more easily.