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Implications of Stablecoins in the DeFi Space

Implications of Stablecoins in the DeFi Space

Following rapid growth in the DeFi space and a steady increase in the value of assets being secured on DeFi platforms, the need for reliable Stablecoins to help balance and maintain the health of a platform is more important than ever. Now, e-Money, offers a range of currency-backed interest bearing Stablecoins that provide near-zero fees, instant settlements, and immediate finality, alongside greater transparency, fairness and accessibility.

Traditional Stablecoin markets include collateralized Stablecoins, which

are backed by real-world assets, and algorithmic Stablecoins which aren’t. Instead, algorithmic Stablecoins are balanced and minted based on the supply and demand of a platform. Both types of Stablecoins intend to hold a 1:1 peg to a FIAT currency such as USD or EUR. However, they both face issues when it comes to maintaining a reliable peg.

Algorithmic Stablecoins can struggle with over-collateralisation and can lack the necessary buying power to maintain a peg when the market turns sour. They also rely heavily on platform usage and smart-contract interaction for instant liquidity, alongside transaction fees to maintain a peg. This can leave users potentially exposed to unnecessary risk and instability.

Collateralized Stablecoins such as USDT are backed by a FIAT reserve, which helps maintain a 1:1 peg as assets can be minted and brought back from the reserve. These also face issues, as it relies on a “centralised” reserve of assets to maintain a peg, which means sudden regulatory oversight or changes can drastically affect the peg. This can affect relationships with banking partners and put stress on the stability of a Stablecoin. Also, as inflation and instability in traditional markets continue, this can affect how Stablecoins operate in a negative interest rate environment.In the DeFi space, reliable pegs are imperative for ensuring that DeFi platforms maximise returns and incentives for users. Collateralized Stablecoins are the most-used option due to their reliable peg and market-wide usage, with algorithmic Stablecoins used sparingly across DeFi. It’s therefore important for Stablecoins to have instant liquidity and reliability across leading DeFi platforms as they’re heavily traded and used frequently for liquidity pools and DEX services.

Currency-backed Stablecoins from e-Money are now looking to provide a better alternative to existing Stablecoin markets. They are fully backed by bank deposits and government bonds, multi-currency, interest-bearing

and audited to show proof of funds. The initial asset offerings are European currencies such as EUR, CHF and scandanavian currencies, , with other global currencies being introduced gradually in the future. e-Money assets will be used for payments, remittances, swift cash allocation and distribution throughout the network, and for payment of any or all transaction fees.

As these Stablecoins are backed by real, tangible assets in European banks, this further ensures a reliable peg with the underlying asset and makes e-Money assets fully collateralized and compliant with regulatory entities. Additionally, as accrued interest is earned on holdings, they become more resilient to changes in the economic climate, while offering benefits to owners of these fiat-backed tokens with positive interest.

The e-Money network is built on the Cosmos network, which is a Proof-Of-Stake network that provides users with immediate finality on transactions, increased scalability and instant payment processing. Also, the network allows e-Money to connect to other services in the Cosmos ecosystem, which can use the currency-backed Stablecoins as a means of payment. It's designed to satisfy the demands of users who are accustomed to card and mobile-based payments systems. For this reason, the service has to be easy to use, fast, and with negligible fees. The network is also multi-chain, with cross-chain bridges to Ethereum, Avalanche and a host of other networks currently in development.

Being a Proof-Of-Stake network, e-Money also offers a staking asset, NGM (“Next Generation of Money”). NGM is a staking and rewards token that helps users secure the e-Money network and validate blocks and transactions, all whilst earning interest on their staked assets. Operations will be solely funded by NGM token rewards, fully aligning the interests of e-Money and NGM token stakers.

e-Money also has a working decentralized exchange, which boosts the utility of e-Money tokens and incentivises the use of e-Money assets across the Cosmos infrastructure. The DEX is currently acquiring the necessary liquidity to handle predicted demand.

Now, as DeFi platforms continue to grow and more value and assets are secured, it’s clear to see that e-Money is on track to becoming a leading Stablecoin provider within the DeFi space. As the entire Cryptocurrency industry develops further, more reliable Stablecoins such as e-Money will be needed to help secure platforms, ensure liquidity remains stable and maintain long-term sustainability.

Disclaimer: This is a sponsored press release, and is for informational purposes only. It does not reflect the views of Crypto Daily, nor is it intended to be used as legal, tax, investment, or financial advice. 

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