Cryptocurrencies have great potential and have been fairly successful in the last decade. However, there are still some serious problems which need to get solved before, if at all the crypto companies aim for mass adoption.
One such plaguing issue is volatility in the crypto space. Prices of major cryptocurrencies are notoriously famous for extreme swings in prices, which make it quite risky for mass adoption. For instance, Bitcoin, the largest cryptocurrency, was valued at over $19,700 in December 2017, and today it is priced around a mere $3,900. Such drastic drops can be devastating and discourage people to use them.
It is this reason that Stablecoins came into being, with a sole aim to provide the much-needed stability to the crypto space. They are usually backed by fiat currencies like USD or GBP, or by traditional assets like precious metals and other commodities. The emergence of Stablecoins has also instilled a bit of confidence in buyers.
Further boosting the popularity of Stablecoins, Hong Kong-based crypto exchange OKEx has announced on Friday that the company would be developing a new Stablecoin backed by the US dollar, in collaboration with Las Vegas-based Prime Trust. The move will see OKEx improving its appeal in the international markets, especially after it expanded operations in 2018.
Prime Trust is a technology-driven financial company, which already supports a few other Stablecoins. The company also provides back office solutions and storage, specifically for blockchain space. It started storing Bitcoin in July last year, consequently adding Ethereum and smart contracts based on Ethereum blockchain.
Many established crypto exchanges have been listing more and more Stablecoins on their platforms. The world’s largest crypto exchange, Binance has also added quite a few Stablecoins on the exchange, latest being the USD Coin by money transmitter Circle.
More importantly, many business corporations are entering the crypto space, by accepting digital coins for payments. And as Stablecoins cover all the shortcomings of Bitcoins and other altcoins, they have been the preferred choice.
For instance, the world’s biggest investment bank JPMorgan Chase introduced its own Stablecoin earlier this year, making it the first bank in the United States to do so. Similarly, social networking giant Facebook is reportedly in final stages to launch its own cryptocurrency, also a Stablecoin, which would be targeted towards enhancing cross-border payments.
Cryptocurrency market had been suffered heavily throughout 2018, facing its worst bears since inception. Many coins lost as much as 90% of their price value, and even the established coins were not spared. Bitcoin kept bleeding for six consecutive months, finally ending the losing streak in February earlier this year.
Contrastingly, the crypto space, on the whole, kept expanding at a humongous 122%. This shows that it’s not that people are not willing to enter the crypto space, it is just that they lack confidence in digital tokens. Stablecoins are perfect for those, who want to taste the flavour of cryptocurrencies and blockchain, but find it too risky, as they provide a perfect blend of decentralization and stability.
Also, the acceptability of cryptocurrencies in government sectors can be improved with Stablecoins. It is a known fact that Russia is creating its own cryptocurrency to tackle its dependence on the US Dollar, and few other countries might follow this way, for whom Stablecoins can be extremely fruitful.
Apart from Prime Trust, there are several other blockchain and crypto companies which have been working to create infrastructure for Stablecoins. To name a few, popular crypto exchange Coinbase, Japanese financial holdings company Nomura and SIX Group, the owner of SIX Swiss Exchange, have all entered the game to serve for institutional investors.