Stablecoins – Are they Gimmicky or Trendy?

Stablecoins

These blockchain based assets known as stablecoins, are digital tokens which are pegged to another asset. This pegging usually links the digital assets to FIAT currencies on a 1:1 basis, attempting to mimic their stability.

The entire purpose of these assets is to provide investors with a blockchain based form of payment, while experiencing a reprieve from the volatility often associated with cryptocurrencies.

These qualities have made stablecoins perfect for use in STOs/DSOs, which have been seen various times, to date.

Gimmicky?

While most stablecoins to have hit the market are pegged to FIAT currencies, there are various options that have attempted to capitalize on the stability of non-conventional markets. Unfortunately, for those going down this road, most have been viewed as gimmicks, or outright scams. The following are two examples of stablecoins based on non-conventional reserves. One with potential, the other a scam – be diligent when utilizing such assets.

Cannabis

Outside of Crypto, one of the hottest industries is the Cannabis market. With legalization taking place throughout the nation of Canada, as well as various states, acceptance of the industry has never been higher. Strengthening the case for Cannabis is its ability to affect change in, both, recreational and medicinal capacities.

Recognizing this, billionaire Alkiviades David has recently announced a stablecoin to be backed by hemp flower. This stablecoin is a BTC based token which is known as SWX Coin. Strengthening the case for its adoption is the intent of the Swissx Global Hemp Exhange to create secondary markets for the trading of this coin.

Shipwrecked Gold

This particular offering took place as an ICO in 2018, and was widely viewed as an outright fraud. Korean firm, ‘Shinil Group’, sold tokens to investors which were to function as a stablecoin, backed by gold found in a shipwreck.

Operations were eventually raided by local authorities, and it came to light that the Shinil Group had no idea if these gold reserves even existed.

Trendy?

A growing trend seen in 2019 is the advent of crypto-based savings accounts. Leading the pack, among the various offerings on the market, is BlockFi. Facilitating services offered by BlockFi is, none other than, Gemini. The Winklevoss run outfit provides custodial services for assets invested through BlockFi – bringing clout and reputability through the affiliation with a licenced and respected third party.

Recognizing the importance of stablecoins alongside assets such as Bitcoin, Ethereum, and others, BlockFi naturally supports the Gemini stablecoin, GUSD.

In a recent update to their service terms, BlockFi announced that investors trusting them with their GUSD will receive 8.25% returns on a monthly basis. This outpaces many well managed mutual funds, making this option a very attractive options for investors.

Offerings like this show a real world benefit to investors, that has actually been realized.  BlockFi in particular has paid out tens of million in interest over the past few months, moving them beyond the promise phase, and on trend.

Market Dominance

Despite the woes, which have plagued Tether over the previous year, the stablecoin market is still dominated by the controversial offering.

While current market dominance by Tether is still strong, alternatives have clearly taken a chunk out of their business. Within the last year, we have seen Tether’s share of the stablecoin market drop from >95% to roughly <75% – a significant drop, showing demand for alternatives.

Tether vs The Pack

We recently took a deeper look at the perception and operational issues being experienced by Tether, and the various options on the market for replacing it. Make sure to check out the following article to learn more about these alternatives, and how they vary from industry-leading Tether.

Stablecoins within Digital Securities

While one of the stablecoins discussed in the aforementioned article may one day prove to win out as the industry darling, the reality is that the yet-to-be released Facebook tokens, Libra, have the best opportunity to do so. This is due to the sheer exposure and influence that Facebook holds over various markets.

The average person prizes convenience over all else. While there are many that are voicing their displeasure and apprehension towards the Facebook product, to date, when the tokens are eventually released, there will be a pre-existing pool of clients gaining access that simply don’t care about past privacy and security lapses.

Regardless of which stablecoin eventually wins out, there are various viable options out there from reputable companies. Right now, industry participants are spoiled with the amount of competitors, as many attempt to carve out their place within crypto – some gimmicky, some on trend.