Cryptocurrency has been around for less than a decade at this point, and while there are a quite a few people who have invested in these digital currencies, it is still not a mainstream form of investment. There are a few reasons for this. One of the reasons is that there are still many people who are not entirely sure what cryptocurrency is or how they can use it. Fortunately, this is becoming less and less of a problem as time goes by. People are more knowledgeable about these digital currencies today than they were a few years ago.
The Biggest Problem Slowing the Adoption of Cryptos
With that knowledge comes another problem, though. It means that people can easily see one of the biggest flaw of this type of currency and investment. These coins are highly volatile. Look at the news and you can see that in 2018 alone there have been some massive swings in the value of digital currencies like Bitcoin. People who might have been interested in making an investment see this volatility and they get cold feet. They like the idea of cryptocurrency and all of the advantages of the blockchain, but they do not want to deal with the volatility.
Of course, some people are attracted to the volatility. They know that the cryptocurrency could drop in value, and that is a risk that they are willing to take because they know that the opposite can be true as well. They know that there is the potential for a great reward with this type of investment.
Still, it comes with a lot of work for those who want to take advantage of cryptos, and not everyone has the time or inclination to spend time watching the charts to know when they should buy or sell the coins. Many chose crypto coins because they wanted an investment that was going to be relatively easy for them to manage.
Because of the concerns that people have with digital currencies, it has greatly reduced the numbers investing in them. While the coins and digital currencies are doing well, they could be doing much better. However, mass market adoption of cryptos is not going to happen because of the volatility mentioned.
For that reason, stablecoins have become what many see as the shining light that attract more investors to digital currency over the course of the next few years.
What Is a Stablecoin?
Stablecoins can be confusing even to those who are involved with cryptocurrency already. These types of coins are going to have reduced volatility because of they way they have been designed. Some of the coins that are available utilize a fiat-collateralized system, which means that there is a central entity that is backing the currency, ensuring its stability. Another option are crypto-collateralized stablecoins, which are not centralized and have backing from the cryptocurrency itself through their reserves.
The most popular of the stablecoins on the market today is called Tether, but despite the popularity, there has been controversy surrounding this coin. This is a fiat backed coin, which means that it has a centralized system backing it. One of the reasons that many people first adopted crypto coins is because they do not trust these centralized entities.
There were sudden changes in the amount of supply that Tether had at one point, which caused many to believe that their fears about trusting a centralized authority. Some thought that they were trying to manipulate the price and popularity, mainly because the supply increase occurred at the same times as there were drops in the price of Bitcoin. Many wondered if they even had the money to back up the new supply.
Of course, Tether is certainly not the only stablecoin out there, and others are being developed, as well. Some are fiat backed, and others are crypto backed. This is still a relatively new area regarding digital currency, and there is not currently a “best” option for stablecoins on the market. However, those companies that are working on stablecoin projects are hoping to change that. They see this as the future of digital currency, and it very well may be.
How Else Can Stablecoin Help With the Adoption of Cryptos?
Not only will the stablecoin be a huge benefit to those who are looking to make investments and who want to have a stable way of making those trades with digital currency, but there are some other benefits, as well.
You will find that when the currency is stable, it is likely going to mean that more companies are going to be willing to accept that form of digital payment. Some of the companies that once took Bitcoin no longer allow the currency because of the massive shifts in value. With a stablecoin, this is not going to be a problem. You will be able to enjoy all of the same benefits that you would have with other blockchain currencies without the same drawbacks of volatility. It could be used with banking, the stock market, real estate investments, and a host of other areas, as well.
As you can see, there is a substantial amount of investment when it comes to stablecoins. They are also likely the only way that we will see the masses start coming over to digital currency. Even so, it is still likely to be some time before this happens. One of the main reasons for this is the fact that so few people know what stablecoin is or how it works. In addition, the companies who are creating these products are still trying to create the perfect coins.
Whether or not they are going to ultimately be successful is going to be up to the market. If they can come up with a coin that is transparent, easy to use and easy to buy, and that is decentralized – and it is marketed widely – it could be the next big thing in finance.