Stablecoins vs Bitcoin: Which is better for the economy?
Much of this is due to the ever-increasing need for global, instantaneous transactions with a level of reliability that no currency can currently provide.
However, you can check how to do business with bitcoin to begin bitcoin trading with the right tools, strategies, and experienced traders’ guidance.
Stablecoins are “crypto assets that maintain a stable value using algorithms and monetary policy”, like US dollars or gold.
It stops these digital currencies from having an unpredictable price while maintaining the same trustless properties that cryptocurrencies have made famous.
In addition, digital transactions have enabled micro-payments, which have already been implemented across various industries like online freelancing, busking and shopping.
So the question is, which is better for the economy – stablecoins or bitcoin? Let’s have a look.
Volatility issues in bitcoin:
The constantly fluctuating value of bitcoin makes it nearly impossible for users to make micro-payments with bitcoins.
In addition, bitcoins transaction speeds can take up to an hour.
Also, with the ever-decreasing number of people willing to put their money into public blockchain ledgers, bitcoin purchases would become quite risky for consumers.
It motivates stablecoins like Tether, real coins and Pay Coin, which use a particular type of blockchain called “p-chains”.
However, many sceptics still think that stablecoins are better than bitcoin because they are backed by money, while any real value does not back bitcoin.
Stablecoins are less risky and volatile and allow users to send micro-payments instantly. In addition, stablecoins often keep the same price for an extended period.
Since all that stablecoins does is create a market for new currency, it would be beneficial if all significant fiat currencies supported using stablecoins to prevent consumers from dealing with price volatility.
Stablecoins can also be easily integrated into existing banking systems that are already in use today.
Differences between stablecoins and bitcoin:
Bitcoin was designed to continue functioning even if more than 50% of the network went down at once (this network partitioning is called “a 51% attack”).
In contrast, a stablecoin does not require any backups of blockchain data or any sort of consensus mechanism to provide security.
They are also not intended to support the purchase of any goods or services, just their use as a store of value.
It can make it more difficult for consumers to make micro-payments with stablecoins when volatility presents itself every time there is news about bitcoin prices hitting new lows or highs.
Different types of stablecoins:
These are the most popular stablecoins because they are pegged to the value of fiat money.
For example, the Tether (USDT) is backed by the US Dollar, while the US Dollar backs Pay Coin (XPY).
Stablecoins like the USDT are considered more reliable than Bitcoin due to their backing by real money.
They are also easily transferable, which makes them a necessary tool for micro-payments between consumers and retailers.
As the name implies, cryptocurrency-based stablecoins are backed by a basket of various cryptocurrencies.
Cryptocurrency-based stablecoins are challenging to maintain because it can be hard to ensure that the currency is 100% backed by the assets it is supposed to be backed by.
These currencies have no intrinsic value and can only be used as a unit of account for what is supposed to replace them.
3. Commodity-Backed Stablecoins:
Tangible assets like copper back copper-backed stablecoins.
These stablecoins are not as vulnerable to fluctuations in the cryptocurrency market.
They are also more easily verifiable than fiat-backed stablecoins because a centralized government does not issue them.
4. Crypto Token Stablecoins
Crypto token stablecoins are backed by a blockchain protocol that produces tokens and a token pegged to a specific value in another currency.
The crypto tokens can buy goods and services from any seller who accepts them, while the other token acts like standard stablecoins.
For example, the Basis (BAS) protocol creates new tokens based on how much demand there is for its USD-pegged BNS token, and it uses smart contracts to manage the supply of BAS and BNS tokens.
Which is better- A stable coin or bitcoin?
Stablecoins are better for the economy as they can provide micro-payments for lower prices and send transactions instantly across the globe.
In addition, they are backed by real money, so they are not subject to value fluctuations like bitcoin.
However, stablecoins do not have intrinsic value in themselves, meaning they can only be used as units of account.
It is one reason some economists believe that cryptocurrencies like bitcoin will become the future standard for all currencies.
In addition, Bitcoin is better for the economy because it does not suffer from the problems of volatility, transaction speed, and scalability issues that fiat currencies face today.