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Cryptocurrencies such as Bitcoin and Ethereum are highly volatile. Which means they could be quite difficult to use in day-to-day transactions for some people. These cryptocurrencies see an increase or decrease of 5-10% on a daily basis; that kind of instability can be very shocking for a consumer.
Imagine finding out that the doughnut you bought for $20 a few days ago is selling for only $10 today. Moreover, these cryptocurrencies have very little oversight currently. Which means they are very easy for majority shareholders to manipulate. This hurts the normal small-time consumer very badly. These are all the reasons why stablecoins came to life.
A “stablecoin” is a cryptocurrency that is attached to another stable asset such as gold, dollar or diamonds. It is a digital currency that is global and is not tied to a bank or any other sort of institutional middle-man yet still maintaining low volatility. A lovechild of the “legacy” money and cryptocurrencies, stablecoin allows its usage of everyday transactions such as paying for groceries or a bagel.
Diar.co reported recently that stablecoins have seen a massive increase in adoption in Q3 and Q4 of 2018. A key factor for users switching over to a different pegged cryptocurrency is also the rising concerns around Tether. An increase of 1032% was reported in on-chain transactions in November as compared to those in September. Stablecoins managed to breach the $2.3Bn mark at the closing of last months.
Overall, the four major stablecoins USDC, TUSD, GUSD, and PAX have gained $5 billion in on-chain transactions within a short 3-month period. Paxos which raised over $93 million has recorded over $1.8 billion on the Ethereum blockchain alone in the past three months. That is nearly double the amount recorded by Coinbase/Circle backed USDC.
Here is a chart comparing the transaction count of the four courtesy of Diar.co.
These developments are a clear proof that the interest in crypto assets is still there and distributed ledger technologies are not going anywhere. However, bad business practices by some of the most prominent cryptocurrencies have started to dissuade the consumers and investors to other kinds of assets that can promise less volatility and more stability.