After the wall street financial crisis of 2008, the world has been left in a perpetual search for answers. Investors and financial institutions learned quite a good number of hard lessons. Perhaps, the most crucial experience gained from the collapse of moguls, entrepreneurs, and investors is that fiat currencies cannot be trusted.
Fortunately, 2008 also marked the birth of the most brilliant financial invention in the 21st century-blockchain technology and cryptocurrency. When Satoshi published the bitcoin whitepaper in the same year, even the best of minds were skeptical. The possibility of eliminating the third party and keeping a public ledger for financial transactions was "crazy".
More than 11 years have passed; there are now well over 5000 cryptocurrencies in the world as of April 2020. The price of 1btc has skyrocketed from its 2009 value. Surely now, the global adaptation of blockchain is inevitable.
However, blockchain technology has been met with a lot of criticism. Former world's richest man and famous billionaire-Warren Buffet has not been bitcoin's biggest fan. He once said: "Of our $49 billion, we haven't moved any to bitcoin". He also once described it as "a real bubble" and advised investors to stay away from it. In 2017, JPMorgan's CEO-Jamie Dimon said he would fire any employee trading in bitcoin for being stupid.
No doubt, bitcoin, and cryptocurrency still have many doubters and critics. Perhaps, one final piece of the puzzle that will silence critics and finally promote mainstream cryptocurrency adoption is the Stablecoin.
WHAT ARE STABLECOINS?
Stablecoins are cryptocurrencies that are less volatile and usually backed up by a reserve asset. The reserve asset could be fiat currency, another cryptocurrency, or some other asset. Invented in 2014, The unique advantage of stablecoins over other cryptocurrencies is the less volatility.
Every bitcoin investor can certainly not forget December 2017. Bitcoin climbed to an all-time high of over $17,000. While this could mean good news for long term investors, questions were raised over the possibility of cryptocurrencies as a permanent means of exchange. By April 2018, the price was less than $7,000; bitcoin volatility was exposed.
Fortunately, unlike traditional cryptocurrencies, Stablecoins are backed by other asset classes, meaning they are very "stable." Tether(USDT), for example, is said to be backed by US dollars, meaning the price cannot fluctuate as much as other cryptocurrencies. Meanwhile, the currency can maintain immutability, public trust, and transparency the technology was founded upon.
This unique advantage of stablecoins has promoted its mainstream and institutional adoption, leaving no room for the flaws in traditional cryptocurrencies. Investors who were once skeptical about transacting or saving on the distributed ledger technology are turning back to the technology.
ADOPTION OF STABLECOINS
Indeed, digitized payment systems will become inevitable in the nearest future. While traditional cryptocurrencies continue to thrive, quite several financial institutions are turning to stablecoins.
Barely two years after bashing bitcoin publicly, In February 2019, JPMorgan announced the arrival of JPM coin, a stablecoin based on the blockchain technology. They became the first major bank in the United States to adopt the technology. Similarly, the world's leading cryptocurrency exchange-Binance announced its dollar-backed stablecoin in September 2019.
Cryptocurrency experts are increasingly confident that stablecoins will lead the way for mainstream cryptocurrency adoption.