What could the cryptocurrency ecosystem do to increase its global success? Stablecoins should be favored.
Emin Gun Sirer is the CEO of Ava Labs. He explained to Business Insider how stability is essential in the world decentralized currencies to ensure that they remain attractive to the public.
Stablecoins will be the next big thing
Emin Gun Sirer, speaking to Business Insider, stated that cryptocurrencies will be a real social phenomenon when a fiat-pegged stabilitycoin is the No. Market capitalization: 1 coin.
“Until the number one coin, a stablecoin, we are far from done,” he said. This is my indicator of real success.
Tether (USDT), the most valuable stablecoin in crypto, is at the moment. It has a market capitalization of approximately $69600 million and ranks number 5 on the most valuable cryptocurrencies.
USD Coin is 5th on the list, a stablecoin that Circle and Coinbase maintain, and has a market capital of $32600m. However, it has a more friendly relationship with US regulators.
Emin Gun Sirer anticipates that stablecoin usage will increase, particularly among DeFi users. These coins have the advantage that they allow users to trade at their own value.
“People want to borrow and want more stablecoins. So I expect the Circles of the world and the Tethers of the world to grow. It’s going be great!”
The ugly side
While cryptocurrencies were initially the invention of cypherpunks who wanted to escape the traditional financial system through cryptocurrency, stablecoin issuesrs used all the technology decentralized crytpocurrencies to create a bridge to the legacy financial system.
A fiat stablecoin generally has no cash backing it. It is usually backed by cash or cash equivalents or assets that guarantee each token is equivalent in fiat money units. For example, imagine 1 USDC token for 1 USDC token, 1 EUR for 1 Stasis, and 1 gram of Gold for 1 Digix.
This situation makes stablecoins dependent on a central entity. Tether Inc controls USDT, USDC by Circle and BUSD by Binance. DAI is managed by a Decentralized Autonomous Organization.
Apart from the philosophical issues, centralization of stablecoins could lead to a tighter regulatory system and government control. Already Circle has taken USDC tokens from blacklisted wallets in order to comply with the law. Tether has been fined a lot and regulators are now looking at ways to treat stablecoin issues as traditional banks.
Marla Brooks – Financial Analysis
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