It was not long ago when the advent of cryptocurrencies was shaking things up in the financial world and was blowing everyone’s mind with the unheard -until then- opportunities for using, leveraging, transferring, investing, and trading cryptos. Ever since that time, however, things have developed rapidly and the entire cryptocurrency ecosystem has emerged into a parallel universe with the traditional financial system.
Cryptos became widely popular in many markets around the world, with emerging countries taking the lion’s share of the continuous growth of crypto adoption, as reported by the Global Adoption Index.
They started being used for several purposes, which were not intended in the beginning at least, but they exhibited such a strong fit, that their ‘marriage’ was inevitable. For example, wagering on sports in any operator offering online betting in Indonesia with cryptocurrencies and gambling with the likes of Bitcoin and Ethereum, came as some of the most prominent applications of digital assets, despite the fact that such kinds of crypto-usages were most likely not even conceptualized before the launch of cryptocurrencies.
But cryptos made their way through the lives of people, promising to offer a new, safe, and more transparent system, an alternative to traditional financial institutions. And the truth is that the perks of using cryptos have actually stunned a big part of the global population, that saw unique opportunities in digital assets. Besides transparency and safety, it was also a matter of privacy, anonymity, global reach, ease of accessibility, and speed that made cryptos so attractive to people.
But their volatility had made many crypto users wonder whether it was actually worth it. Value fluctuation has always been a big challenge for them, particularly as the value of digital assets can rise and plunge very quickly, causing investors a serious headache.
Investing in the volatile cryptos can end up being a speculative action, especially as people don’t really know whether the value of the cryptocurrencies will increase or fall- to a point where they might need thousands and thousands just to purchase a packet of gums.
To offset the pitfalls of conventional cryptocurrencies – it’s even kind of ironic to speak about conventional cryptos when they are only a couple of decades old! – stablecoins were developed. We witnessed something like a second generation of cryptos, which would combine the flexibility, transparency, accessibility, and speed of digital assets with the relative stability of the fiat currencies.
Stablecoins, thus, emerged as cryptocurrencies that would no longer bear the threat of volatility. Being pegged to other assets, stablecoins could fill the gap that the non-pegged cryptos were creating – that of stability. It was incredibly useful for many of those who were more reluctant or skeptical about cryptocurrencies because essentially it provided them what they needed – some sort of security against big or sudden ups and downs.
Stablecoins have now become extremely popular among users. Cryptos backed by fiat currencies (or other assets and commodities as well, but the truth is that these fiat currencies now constituted, probably, the most preferred asset to be linked to the digital currencies) can take the whole crypto market to a new level, where being able to minimize value fluctuations certainly makes it far more appealing and enticing to people.
Less volatility and greater stability, mean that stablecoins can actually be a better choice for payments and transaction purposes – for which the quickly swinging values of cryptos such as Bitcoin are not quite suitable. Conventional cryptos, with all the fluctuations, offer comparable benefits when they are used for long-term investments, hedging against currency devaluations, or long-term value storage. But they have proven very risky when used for short-term purposes and some kind of activities like payments, transfers or everyday business transactions.
Many people have turned to stablecoins for their daily habits and routines, seeking to leverage the combined benefits that they have to offer. Things like sports betting, gambling, business payments, transfers, and purchases are now made with the use of stablecoins like Tether (USDT), USD Coin, Binance USD, etc, which have proven to be very popular among crypto users and also very appealing to new crypto adopters.
We can say that stablecoins are the second generation of cryptos, unveiling the unique opportunities created by the blending of crypto features and asset-enhanced stability. People have embraced stablecoins with far greater ease and less skepticism than they welcomed the first digital assets introduced back in 2008 and who knows, maybe at some point stablecoins might come as the dominant forces in the crypto ecosystem.