Introduction
The cryptocurrency market is a great place to swap tokens and make massive profits. However, it can be a real challenge to move cryptocurrencies from one place to another. This article is all about stablecoins and their use cases.
Top Use Cases of Stablecoins
If you are a cryptocurrency investor, here are some important use cases of stablecoins that you should know:
Low Volatility
Stablecoins have gotten their moniker since they have a stable price at all times. Unlike regular cryptocurrencies, the price of stablecoins always remains stable. For example, Tether’s USD unit price is always equal to 1 USD.
Stablecoins maintain their prices using fiat, commodities, stocks, and other assets as their backing reserves. The stable price point of stablecoin makes them low volatility and safer investments.
Fast Payments
It can take some time to settle big transactions on cryptocurrencies on account of the consensus model, block time, mining/validator efficiency, trading volume, etc.
Therefore, stablecoins offer a seamless and quick way for cryptocurrency investors to preserve their profits by converting them to stablecoins. At the same time, stablecoins are also used for quick and easy payment options.
Low Cost
It is possible to make cross-border payments using stablecoin with relative ease to the current payment methods using traditional banking networks. At the same time, they are also much cheaper in terms of transaction costs.
Micropayments
Stablecoins often have a unit price equal to that of 1 USD. Therefore, cryptocurrency investors who wish to make the conversion or make a purchase can also make smaller payments using them. It makes stablecoins a more suitable payment vessel for the purchase of products and services online.
Smart Contracts
Since stablecoins are not subject to high price volatility like other cryptocurrencies, they are often used for making trades within the decentralized gaming ecosystems.
Therefore, they can also play an important role in the settlement of the smart contract without the worry of rapid price changes in the native tokens of the game or hosting blockchain networks.
No Middlemen
When it comes to changing fiat to cryptocurrencies or vice versa, investors need to depend on a third-party services provider. In various geological jurisdictions, these middlemen might not be available.
On the other hand, third-party services converters also charge additional fees. Therefore, investors can preserve their crypto trading gains by quickly converting them into stablecoins without needing any third-party plug-in for a smaller transaction cost.
Privacy and Transparency
Stablecoins are secure and they can provide financial privacy for the traders since they can be traded in a peer-to-peer manner. However, stablecoins are regulated on account of their backing reserve compliance requirements.
At the same time, they are based on blockchains therefore they also offer transparency for the investors in the form of on-chain data records.
Defi Liquidity
Stablecoins are often used in liquidity pools and decentralized applications to increase liquidity. Liquidity is the ability to easily purchase or sell a given asset.
Arbitrage
Cryptocurrency investors can maximize their profits using stablecoin by converting their crypto reserves into stablecoins to shift them to the other cryptocurrency exchange. Without the presence of stablecoins, the transition can become lengthy, costly, and time-consuming.
Conclusion
Stablecoins are an essential part of the cryptocurrency marketplace. They are used by crypto investors to leverage quick market changes. At the same time, government regulators are now mandating the stablecoin issuers to declare their backed reserves to protect the interest of the investors.
