Why stablecoins are better than anything fiat currencies have to offer?
Stablecoins are the type of crypto that combines the best of both worlds - the speed, security and decentralization of blockchain and the stability of fiat money. Still, fiat is more stable than cryptocurrencies. It has inflation, but at least it doesn't lose 90% of its value in a year.
Of course, all of us know the flaws of fiat currencies. They can be printed out of thin air, according to their issuing governments’ monetary policy. The new Chinese initiative of creating blockchain-based money means that governments will be able to track the movement of money between all citizens and companies.
On the other hand, crypto stablecoins remain more or less anonymous, because you can have as many wallets as you want. Also, they are usually backed by something, because that's the only reason why they remain stable on the volatile crypto market, it's simply a derivative of other assets. But the funds that serve as the backing reserve are different in each stablecoin. So, first of all, let's see what types of stablecoins are on the market.
We can divide all stablecoins into three categories:
Backed by fiat currencies. Not the best option, given that the world might soon experience the new debt crisis. Usually, these stablecoins are collateralized by USD. Example: USDT, TrueUSD, HUSD, GUSD, USDC, BitUSD.
Stablecoins, backed by precious metals. It's a better option because every stablecoin is collateralized with some amount of gold or silver. Example: DigixDAO.
Algorithmic stablecoins. The best type of stablecoins. They are backed by other decentralized assets, but they keep their peg automatically with the mathematical algorithms. Examples: USDQ, KRWQ, DAI.
A stablecoin, whose collateral in USD is kept at a bank, isn't better than the regular fiat money, or maybe even worse. It's exposed to the same risks: the risk of freezing the collateral for some reason by the bank where it’s kept and the system risk of the global crisis and the following inflation. Currently, the debt in the world is worse than it was in 2008, and the largest economies, such as Germany, slow down in their industry output, thus it's not the best idea to stay in fiat money or its derivatives.
Gold-backed stablecoins are more reliable, as, in the case of the real monetary crisis, gold will keep or even rise in its value. However, it's still centralized, as somebody has to keep all these gold bars in the vault, and you have to rely on the stablecoin’s issuer that all these stablecoins are backed.
Algorithmic stablecoins, such as USDQ and KRWQ of the Q DAO ecosystem, incorporate the best practices, existing in the crypto world. They are decentralized, they don't depend on one entity, and they are backed by a decentralized collateral in the form of BTC. The price peg is kept automatically, so there's no risk that your funds will be devalued. The peg means that your token value will be always equal to its related fiat currency, but you still keep your collateral. In the situation when the value of the US dollar decreases and the value of BTC increases, you can simply create more USDQ with the same amount of collateral. Also, you can always retrieve your funds by burning the stablecoins.
Conclusion
During the crises, investors lose their risk appetite, and stick to something more reliable, because it's important not to lose money if you want to make more money on the market. Stablecoins, such as USDQ and KRWQ, are the universal solution for keeping the value of your portfolio intact in any case. Governments can print more fiat money, but nobody can print more stablecoins without adding more collateral. The infrastructure for crypto is developing, and very soon it will be possible to pay with any cryptocurrency anywhere, so there wouldn't be any reason to stick with fiat. That's when the stablecoins will flourish.
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