What Are Stable Coins and Their Use Cases

What Are Stable Coins and Their Use Cases 2

Stable coins have increased in popularity due to their ability to handle high volume transactions for modern financial institutions and offer lower transaction costs, robust security, and transaction finality.

This article provides information about stable coins and why so many people will choose crypto coins by studying some use cases.

Find the stable coin list and the most promising cases of stable coin use for global finance.

What Are Stable Coins

Stable coins are digital assets that are backed by a low-volatility asset. The stable coin is usually backed by reserve assets in fiat currency or commodities to ensure price stability. For example, USD Coin (USDC) is supported 1:1 by U.S. dollars reserves held in U.S. financial institutions.

Volatility may be compelling in certain circumstances (e.g., when trying to generate yield), but it is not helpful when trying to account for an item’s worth. This is in contrast to many digital assets, which are subject to significant price fluctuations.

Stable coins, as the name implies, provide price stability. As a result, stable coins, a digital asset designed to have a steady value linked to a fiat currency or a commodity, are well-suited for transacting and accounting.

Stable coins can now be used in real-world situations. For example, they are being used for cross-border payments and as banking infrastructure for people without access.

These stable coins are already available on the Blockchain network:

Tether USD

Tether, a market-leading stable coin, launched Tether USD in 2014, the largest stable coin market capitalization. USDT has maintained its advantage and is now the most popular stable coin for investors and traders in crypto asset trading.

QCAD

Stablecorp created the first-ever fully-compliant Canadian dollar stable coin called QCAD. QCAD, the first stable coin that the U.S. Dollar does not back. This allows for a USD/CAD trading pair.

USDC Coin

USDC is a U.S. dollar-backed stable coin that has been fully reserved by industry leaders coin base and circle. USDCs are backed 1:1 by U.S. dollars reserves in U.S. financial institutions. In addition, each USDC is subject to monthly auditing by a global auditing firm to ensure transparency for its owners.

Use Cases

Trade

Stable coins are an excellent solution for institutional traders and exchanges who need to reduce crypto exposure but not fully cash out. This use case is already entirely in effect. For example, tether, the largest stable coin market capitalization, was used in 40%Transactions on Binance and 80% on Huobi and Bitfinex which are the two largest exchanges in the world.

Safe Haven Asset

Stable coins are a safe haven asset and are designed to have a stable value over time. Unlike other cryptocurrencies such as Bitcoin, which can fluctuate in price daily, stable coins have no risk of losing value. They also have full custody of all assets. 

Recent examples of the stable coins’ price stability have been shown in the Venezuelan politico-economic crisis. As a result, many Venezuelan citizens fled the country, but they kept their Bitcoin savings.

Transfers

International money transfers can be costly. When sending money home, overseas workers have to deal with cross-border payments as well as remittances. Most migrant workers in Asia, for example, pay high fees to send money abroad.

They pay approximately $200 per month but $12 in international transfer fees. Ripple’s (XRP) has been created to demonstrate the viability and potential of blockchain solutions in solving the remittance issue.

Payments

Accepting stable coins for payment benefits businesses because it circumvents the restrictions of the exchange rate. Transaction fees of 2-3% are in addition to the processing fees charged by financial institutions for intermediary transactions. 

Facebook Libra, a global payment platform, is ready to accept payments worldwide, taking advantage of blockchain technology’s low transaction fees.

Tell us what you think of crypto use cases. Can they be used for any other purposes? We would love to hear your feedback.

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