A variety of innovations have sprung in the finance industry – all because of technological innovations. We’ve seen the rise in popularity of digital banks for their ease of access, for instance, and also e-wallets which have likewise been praised for similar reasons. However, there’s one innovation that’s been grabbing all the attention in the fintech space: blockchain technology. We describe in this article Revolutionizing Lifestyle: How Stablecoins Are Transforming the Way We Manage Finances.
If you aren’t familiar with blockchain, it’s the technology that describes a public ledger containing all records of transactions. Part of the innovations in this field includes cryptocurrency, a decentralized currency that leverages the power of blockchain technology. Coins like Bitcoin and Ethereum are some of the more popular ones, however, there are thousands of others in existence.
The world of cryptocurrency is well known to be volatile, so much so that it isn’t unheard of to hear of your portfolio values soaring (or plunging!) overnight. In times of extreme volatility, investors and traders would typically turn to something more stable. Fortunately, there are cryptocurrencies that come in the form of – well, you guessed it – stablecoins.
What Are Stablecoins?
Now, let’s get into more detail about these stablecoins. Implied by the name itself, a stablecoin is a decentralized currency that’s pegged to a fiat currency, like the US dollar, which provides stability. It’s almost like having fiat currency in your wallet, except that you reap the benefits of blockchain technology such as enhanced security and transparency. Plus, it’s a lot easier to exchange stablecoins directly to your cryptocurrency of choice. Some notable examples of stablecoins include Tether, USD Coin, and DAI.
Stablecoins: Transforming the Way We Manage Our Finances
We’ve covered the definition of what stablecoins are, but now let’s take a look at the bigger picture. How exactly are they transforming the way we manage our finances? There are various ways, so let’s get to know each one of them:
Faster and Cheaper Transactions
Some of the major benefits of stablecoins lie in their affordability and speed. Whether you’re in the United States, Australia, or Japan, it doesn’t matter where you send your stablecoins from as they can be transferred with minimal fees. This is a huge win for businesses that thrive on overseas transactions with their clients. Individuals benefit too, especially when they want to send money to their loved ones.
Approximately 1.4 billion people remain unbanked – that’s roughly 2 out of 10 people. Traditional banks aren’t known to be very accessible, especially to those living in underdeveloped areas. Another issue with traditional banks includes the problem of maintaining a low-balance savings account, resulting in users incurring steep penalties.
With bank integration for stablecoins and other cryptocurrencies, just about anyone can access their digital assets through their own bank account, as long as they’re connected to the Internet. Depending on the bank, one may still have to provide other requirements such as proof of identification.
Stability for Investing and Trading
Let’s face it: not everyone can weather extreme market downturns. While the idea of turning to the next millionaire overnight can sound exciting to some, many forget that their investments could just as easily turn to zero, especially when they don’t practice risk management strategies.
That’s why, for anyone looking to venture into the vast world of crypto, it’s best to allocate a part of your portfolio to stablecoins. Sure, this might not give you the highest returns, but it can help you make more calculated decisions, especially in times of high market volatility. Plus, it helps you seize the best opportunities in the market when you get to buy your favorite coins at a discount.
Provision of Liquidity and Yield Farming
It’s no surprise that stablecoins help in providing liquidity. Especially in the field of decentralized finance (DeFi), stablecoins are crucial to providing liquidity for decentralized exchanges. Another attractive feature of stablecoins is their use in yield farming which, in short, is all about users lending their stablecoins for high-interest rates, often surpassing those given by traditional savings accounts.
Use in Everyday Transactions
With crypto now slowly going mainstream, it’s expected to affect almost every aspect of our lives – everyday transactions included. Whether you’re shopping for your monthly groceries or that brand-new gadget, crypto can be used as a form of payment. Note that not all establishments do accept cryptocurrencies and when they do, often it would be just limited to the more popular ones, like Bitcoin, Ethereum, or other stablecoins.
Management of Payrolls
A problem that plagues global teams involves their payroll. Sometimes currency conversions, transaction fees, and other exchange fees can greatly affect how much you receive. Instead of dealing with all of these issues, many remote teams can look into using stablecoins to manage payrolls, therefore reducing the hefty fees associated with them.
Stablecoins are one of the latest innovations to transform the financial landscape. As discussed in this article, many benefits include low costs, stability, and increased accessibility – but all of that is really just scratching the surface. As blockchain technology advances rapidly, one can only expect great things to come for stablecoins – so watch out for them.
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