A new entrant took its own space in the world of digital coins and tokens, and that is stablecoin.
Stablecoin is a form of cryptocurrency which is pegged against an external asset class (usually fiat currency or exchange-traded commodities). The main motive is to minimize price fluctuations by pegging it against a traditional real-world asset.
Stablecoin gained its strength due to its benefits like low-cost and high-speed transactions, massive borderless global reach and transparent transactions, making them attractive as a means of payment. Stablecoin development services come with a user-centric approach that can be embedded in the digital application and through that seamless blockchain-based payment could be made globally.
Further, let us delve into the real-world use-cases of stablecoin.
The only attribute that limits the usage of cryptocurrencies, in general, is their price volatility. Thus, stablecoins have been designed by keeping in view to keep their price stable. This feature makes it an ideal option to store your investment without the risk of everyday fluctuation. Crypto trader sees no risk of loss because they even provide full custody of their assets. Both the elements of price stability and self-custody make stablecoin a safe haven asset.
Blockchain-based stablecoin payments are gaining rapid traction in the market. Walmart created its own stablecoin and is applying for a patent to take it forward as their payment mechanism. There are numerous business benefits of accepting stablecoins as a payment option. One is that it would minimize the transaction fee to 2-3%, which is otherwise taken up by intermediary parties and financial institutions. Also, Facebook is working in this direction to leverage the benefit of lower transaction fees by adapting to blockchain technology.
The real problem in conventional functioning lies within the cross-border payment and remittance platforms. Oversees workers face issues while transacting their money way back home. The international transaction fee is way too high as at times it takes a toll on the monthly budget of the sender. It has been seen most of the Asian workers send approximately $200 on a monthly basis to their home back and the international fee is calculated at $12 which is generally half of their daily wage.
The use of stablecoins for cross-border payments can expedite transactions and minimize the transaction fee since there are no third-parties involved in the transaction.
Nowadays, MNCs are also considering delivering payrolls by using stablecoins. Such a plan was initiated by Japanese shipping company Nippon Yusen Kaisha in November 2018 to pay its workers in terms of USD-pegged stablecoins. This approach would further ease out the working of sea workers in managing their finances and in streamlining the process of sending the money way back to their homes in local currencies. The workers came from different nations and by using stablecoins, a huge amount of their hard-earned money would be saved, which otherwise be dramatically used in paying high international fees.
Banks or any third party settlement agencies are subject to normal working hours which often delay the settlement procedure. Therefore, whenever you would undergo any settlement process, it may take days to complete a normal process. However, in such a scenario stablecoins work best, they are operational 24/7, simply because they run on the blockchain. There is no central authority that works for limited business hours and hence, settlements can be done instantly.
Stablecoins are the solution for reducing crypto exposure and therefore, is the answer to all the complications of cryptocurrencies. Fiat on-ramps and off-ramps are executed conveniently without cashing them out. Tether, which is the largest stablecoin, has 40% of its transactions on Binance and 80% on Huboi exchange.
Many companies are partnering with a reliable stablecoin development company to coming up with a blockchain-based payment integration system that usually accepts platform token, such as ether to clear the settlement. The prices of cryptocurrencies are variable in nature and fluctuate every now and then. This may affect the sustainability of the application as users may not be able to receive enough funds as anticipated as prices may have been dropped. Thereby, stablecoins provide a more robust ecosystem and stabilizes the payment method.
Stablecoins are based on smart contracts that completely automate the escrow system. It functions without the intermediation of any third party and systematically evaluates escrow conditions. As stablecoins are backed by blockchain technology, thus, the transactions come under public audit. Also, the price stability is maintained and significant losses from volatility are saved.
The demand for stablecoin has also been on hype, both institutional and retail investors are fueling the demand in the global market. Stablecoins provide high-yield opportunities to its traders and investors. The returns offered by stablecoins are in double-digit interest rates and even offer returns as high as 15%.
According to the World Bank, there are still 3 billion adults who are unbanked and are looking to access banking services. However, now we have stablecoin as a bank account which only requires access to the internet to operate. These banks are not subject to limited bank hours and users have full custody of their funds. There are also some businesses that are not able to open their company’s bank account due to one reason or another and in this situation, they can safely store their assets in these alternative banking.
Stablecoins are eliminating the problem of price volatility of crypto assets and thus are thus gaining global adoption.
If you also want to harness the potential of stablecoins and wish to capture the growing market demand, then leverage the expertise of our technical experts.
We offer business-oriented stablecoin development services, helping you to tap into the promising stablecoin market.
Schedule a call with our domain-specific experts to share your business requirements.