In today’s article, we will be going through the advantages and disadvantages of stablecoins. Stablecoins, as their name puts forth, is a class of cryptocurrency that offers price stability. It can either be done using algorithms or backing up the transaction with tangible assets.
The year 2014 was the introduction of the first stablecoin. Through the years, it has become popular because it offers the speed and security of a blockchain network and takes volatility much lower than it is in most forms of cryptocurrencies.
Stabelcoins are a form of fiat currency that is blockchain-based. This implies that they are blockchain-friendly and relevant in smart contracts. It is a stable asset and can serve as a good store of value.
Let’s discuss the significant advantages and disadvantages of stablecoins.
Stablecoins are cheaper to use than fiat currencies in transactions as a currency. Due to its wide acceptance on various trading platforms is an excellent choice for making cross-border payments. It comes out as cheaper, but it is also highly efficient and quicker.
The major disadvantage of stablecoins is counterparty risk. The possibility that another party participating in an agreement could default is counterparty risk. In this circumstance, a stable coin issuer may not have the reserves claimed or may refuse to redeem tokens for their reserves.
Another disadvantage stable coins have are fewer returns on investments. Traders and investors naturally would rather have higher returns; therefore, they might resort to other options.
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