Stablecoins are seeing a huge rise in offering. This is mainly due to the prolonged bear market thanks to which we have more than 50 stablecoins on offer today. That means the next big cryptocurrencies just be might a stablecoin.
Now that stablecoins have gained some media and industry attention, it’s important to look at how these assets might eventually grow in the near future. They have the biggest potential for change and positive impact and also present a lot of opportunities.
Stablecoins are simply a manifestation of a stable collateralized asset blockchain. This asset is used to hedge against the rampant decline and volatility of the many crypto prices. Because of this, stablecoins are more often than not, backed by traditional assets like fiat currencies and/or precious metals. As such, they have no appreciation value and only reflect on the performance of the underlying asset.
They are also used as a mechanism to move value in stable terms. While they are considered crypto, that is only in order to appease the tokenization process and guard against double spending. In fact, most stablecoins despite being on a public, decentralized blockchain, are centralized.
By being the first stablecoin, Tether experienced the both the pros and cons of being the only one of its kind. It’s on the slowest blockchain and failed to secure a third-party auditor. The inability to present a reliable bank account has dealt a strong blow to the stablecoin’s reputation.
The first stablecoin will be studied by all next-gen stablecoins
Many crypto projects around the world have experienced this as well. Despite all of its shortcomings and speedbumps, Tether has been very useful as a guinea pig for the industry. All the new coins entering the scene like GUSD, USDC and PAX will make use of Tether’s experience and forge the next generation of stablecoins. The stablecoin from the next generation will have very high expectations.
In order to unlock one of the biggest problems behind current offerings, the blockchain must be scaled. The majority of them are using the slow ethereum blockchain. Tether uses the Omni protocol, which is on top of bitcoin. These blockchains are by no means user-friendly and they prohibit the onset and velocity of payment mechanisms.
While blockchain is developing on all fronts, for stablecoins to reach the next level, they require a combination of speed, security and decentralization which is simply not found anywhere today. Sidechains are viewed by many experts as the natural scaling solution. The centralization inherent in incumbent payment systems however, doesn’t provide the advantages which cannot be copied in true decentralized systems.
At the moment, Visa and MasterCard are in the possession of large networks. Stablecoins will need such networks to find a way to transact across borders and developing technologies. This has to happen with security and speed maintained at the highest possible level. There also needs to be a better defined global legal and tax framework to govern these new assets.
In the long-run know-your-client (KYC) and anti-money-laundering (AML) checks and balances must become enmeshed and connected with the blockchain. This will make stablecoins easily usable in applications ranging from buying milk to cross-border payments.
It’s foolish to think that all this will happen in the next year or two. 2019 is shaping to be a pivotal year for stablecoins, but there are already clear drawings on the horizon and if given to the right artists, can be used to paint a masterpiece for everyone to enjoy.
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