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Cryptocurrencies have always had a rocky path but a true cause of optimism is the industry’s resilience to these tough times. Even as the bear market drags on, cryptocurrencies continue to fight and resist the harsh winds. The bear market will eventually end and cryptocurrencies will once more go on a bull run. However, a new report by George Samma, cryptocurrency and blockchain advisor, suggests stablecoins is where the industry is headed.
Stablecoins are cryptocurrencies that retain a stable value. The idea that a cryptocurrency could hold a stable value sounds unrealistic but it is made possible by pegging the cryptocurrency against fiat currency or assets. Through this attachment, stablecoins have the potential to become a multi-trillion dollar asset class.
In the report, Samman explains that stablecoins create connections between the legacy world and the blockchain. The report argues that stablecoins could be the answer to the problem of price volatility that plagues cryptocurrencies today.
“The raison d’être of stablecoins is to mitigate and solve price volatility which has so pervasively characterized cryptocurrencies while attempting to retain other characteristics of bitcoin such as the free flow of capital and censorship resistance.”
The report also delves into some technical discussions, specifically, regarding the argument that design issues could hinder USD-pegged stablecoins and notes stablecoins need to move beyond USD attachment in order to become censor-proof and truly decentralized.
“The holy grail of stablecoins is to become the decentralized central bank for the Internet. Only with true decentralization can the needs of people in emerging markets – especially those living under authoritarian regimes – be met without fear of these stable currencies being shut down.
While stability is currently assumed to be tethered to the USD, in the future it is expected that the stability of stablecoins will be tied to a diversified basket of tokenized assets rather than the USD.”
Stablecoins have gained a lot of traction since back in 2018. Many big mainstream companies and banks have plans in place to launch their own takes on the stablecoins. Just last week, JPMorgan became one of the first major US banks to launch a stablecoin of their own called JPM Coin.
In the end, Samman concludes by saying,
“Our current monetary system has resulted in a global level of price instability and inflation and cryptocurrencies may offer reprise from what for a long time has been a less than ideal status. Stablecoins offer an important evolutionary step in the growing fields of blockchain and cryptocurrency to tackle this challenge. Money being issued and created solely by governments will start to become tested as competitive currencies and money systems emerge which are designed to make money programmatically stable and usher in a new era of decentralized finance.”
Whether or not stablecoins will be able to reach their true potential is yet to be seen but one thing is clear. The industry is committed to finding the right mix of security, cost-efficiency, and transparency in global finance through blockchain.