The second wave of stablecoin craze hit the market at the beginning of 2019, but the stablecoin today already differs from what it was last year.
I. What are stablecoins?
A stablecoin is a coin pegged to a fiat currency, usually the US dollar, to maintain a stable value. As the exchange rates of fiat currencies are relatively stable and less volatile, stablecoins allow for practical usages of cryptocurrencies in everyday life.
II. Why do we need stablecoins? What is their value?
This is a very important, yet seldom addressed question. Below please find a sneak peek of each proof-point - for full version, please visit here.
I. What are stablecoins?
A stablecoin is a coin pegged to a fiat currency, usually the US dollar, to maintain a stable value. As the exchange rates of fiat currencies are relatively stable and less volatile, stablecoins allow for practical usages of cryptocurrencies in everyday life.
II. Why do we need stablecoins? What is their value?
This is a very important, yet seldom addressed question. Below please find a sneak peek of each proof-point - for full version, please visit here.
| 1. Stablecoin is a gateway to digital asset investment Since the second half of 2017, some countries and cities have started to restrict or even ban digital asset transactions by limiting the payment channels for exchanges in banks, so as to limit fiat currencies from entering the crypto market. At that time, a lot of exchanges was forced to shut down in China, but there were new traders and new funds looking to enter the market. Their only choice remained was...... Read More | 2. Stablecoins offer a good store of value for digital asset investment The prices of digital assets are subject to relatively high volatility, especially when the market is experiencing a downturn. If traders are unwilling to take the risk of price volatility or cash out, or when exchanges do not support fiat trading pairs, trading with stablecoins seems to be their only option. The hottest stablecoins under the spotlight last year aimed to..... Read More |
| 3. Stablecoin is a convenient real-time payment settlement tool The stablecoins by JP Morgan and Japan’s Mizuho Bank are good examples. Blockchain facilitated significant improvement in payment settlement systems, notably on cross-entities payment. The stablecoins developed by these two banks are essentially blockchain settlement networks, which will grow in value when more financial institutions and...... Read More | 4. Stablecoins are decentralized global currencies and safe-haven assets Let’s go back to the basics: Bitcoin was created as a non-state currency that allows for free competition. Comparing to the monetary system today, a transparent and stable form of currency like Bitcoin, could be a new safe-haven asset to the people in Venezuela and Zimbabwe who have to face hyperinflation and sovereign debt defaults...... Read More |
III. Different Models of the Stablecoins
In the past year when industry players jumped on the stablecoin hype train, many analysts attempted to categorize stablecoins, generally into three types: fiat-collateralized, crypto-collateralized, and algorithmic-collateralized. Yet, this kind of categorization is rather ambiguous, especially for the last one...
IV. A Comparison of the Models
1. By the underlying protocols
Stablecoins like Reserve and Terra stabilize their prices by buying/selling the coins in open market. However, this approach is considered the least practical and is very difficult to scale and develop in the long run. Simply put, how can the reserve and the revenue of an e-commerce platform or an investment fund measure up to the purchasing power of the global stablecoin market? This kind of stablecoins may only work in small or regional markets...
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2. By the historical prices
In terms of price stability, the fiat-backed stablecoins performed the best amongst all stablecoins. Taking a >5% deviation as a standard, PAX’s ratio for price deviation from the normal range in the past 153 days is 1.96%; TrueUSD’s ratio for the past 358 days is also 1.96%; USDT’s ratio for the past 1458 days is 4.05%; while GUSD’s ratio for the past 144 days is 9.72%...
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V. Analyzing the Prospect of Stablecoins
1. Fiat-collateralized stablecoins are still the mainstream.
In the coming two years, fiat-collateralized stablecoins is expected to flourish. It will require more reliable issuers, a better audit system, and a more mature regulatory framework...
...
2. Digital fiat currencies and stablecoins are still not competitive
If stablecoins are designed to satisfy the need for digital asset trading, as long as the regulation on fiat-to-token trading worldwide remains tight, stablecoins will still have their market value...
...
3. The stablecoins by JP Morgan and Mizuho Bank are essentially payment settlement tools, but they are cornerstones for building an ecosystem.
JP Morgan’s JPM Coin is pegged 1:1 by the US Dollar and will circulate between the bank and its institutional clients. J Coin, invented by Mizuho Bank, is redeemable 1:1 for 1 Japanese Yen and can be used by general consumers to settle retail payments...
...
Learn more from the full article... where we will talk about the different models of the Stablecoins - its comparison and analysis to its prospect. Share with us if you have any thoughts around Stablecoins.
To view the full article on Medium
In the past year when industry players jumped on the stablecoin hype train, many analysts attempted to categorize stablecoins, generally into three types: fiat-collateralized, crypto-collateralized, and algorithmic-collateralized. Yet, this kind of categorization is rather ambiguous, especially for the last one...
IV. A Comparison of the Models
1. By the underlying protocols
Stablecoins like Reserve and Terra stabilize their prices by buying/selling the coins in open market. However, this approach is considered the least practical and is very difficult to scale and develop in the long run. Simply put, how can the reserve and the revenue of an e-commerce platform or an investment fund measure up to the purchasing power of the global stablecoin market? This kind of stablecoins may only work in small or regional markets...
...
2. By the historical prices
In terms of price stability, the fiat-backed stablecoins performed the best amongst all stablecoins. Taking a >5% deviation as a standard, PAX’s ratio for price deviation from the normal range in the past 153 days is 1.96%; TrueUSD’s ratio for the past 358 days is also 1.96%; USDT’s ratio for the past 1458 days is 4.05%; while GUSD’s ratio for the past 144 days is 9.72%...
...
V. Analyzing the Prospect of Stablecoins
1. Fiat-collateralized stablecoins are still the mainstream.
In the coming two years, fiat-collateralized stablecoins is expected to flourish. It will require more reliable issuers, a better audit system, and a more mature regulatory framework...
...
2. Digital fiat currencies and stablecoins are still not competitive
If stablecoins are designed to satisfy the need for digital asset trading, as long as the regulation on fiat-to-token trading worldwide remains tight, stablecoins will still have their market value...
...
3. The stablecoins by JP Morgan and Mizuho Bank are essentially payment settlement tools, but they are cornerstones for building an ecosystem.
JP Morgan’s JPM Coin is pegged 1:1 by the US Dollar and will circulate between the bank and its institutional clients. J Coin, invented by Mizuho Bank, is redeemable 1:1 for 1 Japanese Yen and can be used by general consumers to settle retail payments...
...
Learn more from the full article... where we will talk about the different models of the Stablecoins - its comparison and analysis to its prospect. Share with us if you have any thoughts around Stablecoins.
To view the full article on Medium
