As the cryptocurrency market thrives in the digital age, there are four characteristics that are pivotal for a digital currency to thrive.
- Decentralization: The concept of cryptocurrency on the blockchain is to remove any third-party control and return the power back to the primary members in the network.
- Privacy: As the term cryptocurrency suggests, the pseudonymity of the blockchain network is a huge draw for users and minimizes the risk of hacking or other invasions of privacy.
- Scalability: A cryptocurrency should not be restricted to providing just one service; it should be accessible and usable to a wide audience.
- Stability: A cryptocurrency must have short-term stability to encourage users to make transactions and long-term stability to motivate users to invest.
Volatile changes in price can undermine the credibility of any currency, whether fiat or digital, and this volatility is perhaps the single biggest downfall of cryptocurrency.
What if there was something whose value could be made dependent on the one of the more stable and dependable exchange medium available in the market? Cue stable coins.
What is a stable coin?
The stable coin is a cryptocurrency which has its value pegged to the US dollar or another stable currency on the market. Notably, a stable coin’s value and price fluctuations are not dependent on its demand and supply in the market but rather on the value of the currency to which it is pegged.
Generally, stable coins can fall into two categories: legally-backed or stable but not legalized.
Legally backed stable coins are backed up legally by the asset it is tied; if the value of these coins fluctuates by a large margin, holders of these coins will be compensated for the equivalent value in the stable currency that collateralizes these coins.
Non-collateralized stable coins are also pegged to a stable asset but does not offer legal protection for token holders because it is not collateralized by the asset. In other words, maximum efforts are made to reduce the gap between the price of the asset and the price of the stable coins. However, in the case of major fluctuations in the stable coin value, asset holders will not be liable for any extra credit or compensation.
A major advantage to a stable coin is that it provides credibility and stability to counteract the volatility of cryptocurrency, adding to the already-favored benefits of security and transparency advantages in cryptocurrency.
The rising demand for stable coins
Hypothetically, if you buy a breakfast today for USD $6 and tomorrow the price of the same meal rises to $10 or dips to $3 due to market changes, you will likely lose trust in the US dollar. What is the true worth of the meal?
Volatility is the major roadblock to cryptocurrencies’ path to mainstream adoption for daily use.
Stable coins answer to the needs of the crypto market. Some users can brave the risk of the high highs and low lows of the crypto market, while others are calling for a stable and reliable counterpart so as not to take unnecessary risks with hard-earned savings. This is why the need of a stable cryptocurrency has risen over the time.
UnitedBitcoin is answering to the cry for stability in the crypto market with a launch of the first UB stable coin: UUSD pegged at a 1:1 ratio to the US dollar. The UUSD is a legally-backed stable coin that is over-collateralized by 300% to combat the volatility of the crypto market and to offer peace of mind for everyday consumer use. UB’s stable coin will be audited by global third-party firm to maintain transparency and trust.