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What Are Stablecoins?

There are thousands of different types of cryptocurrencies available today making it nearly impossible for non-experts to keep up. Many have appeared on the scene only to fail and disappear before most people were even aware of their existence. Cryptocurrency is digital or virtual money that takes the form of tokens or virtual coins. The first and arguably biggest and the de facto standard cryptocurrency is Bitcoin. It has the largest market capitalization, user base, and popularity.[1]

stablecoins

The brief history of cryptocurrency (which has only been around since 2009) shows that it can be extremely volatile, fluctuating unpredictably. Bitcoin, for example, has had dramatic ups and downs, and this year alone has seen it jump in value from below $4,000 to over $13,000.

Enter Stablecoins

A stablecoin is a cryptocurrency or a crypto token that matches the value of a real-world asset. In many cases, it’s an asset that has a predictable value and purchasing power.[2] A common example of a stablecoin is one that might be attached to the value of the U.S. dollar (USD). This type of relationship is referred to as “being pegged”. So a stablecoin that is pegged to a stable asset like the USD has a ratio of 1 unit of cryptocurrency equal to 1 USD, or 1:1.

How Is This Different From Bitcoin?        

While you can use USD to purchase bitcoin, they are not “pegged” and one bitcoin can vary greatly in price, as we have seen. The price of bitcoin is determined by the market, or whatever people are willing to pay. The value of bitcoin is related to its scarcity and utility. In other words, if something is both rare (scarce) as bitcoin is, and useful, it is valuable. There is a finite number of bitcoin that will ever exist (capped at 21 million), and because it can be used to pay for things and is easily verifiable due to blockchain technology, it is useful. The more people who use it and understand it, the more valuable it becomes.

Why Do We Need Stablecoins?

Let’s say you want to pay a bill using bitcoin. Because the value of bitcoin fluctuates minute-by-minute, unless your transaction can be instantaneous, it’s likely that the amount of bitcoin you transfer to pay your bill won’t be worth that exact amount by the time it is received and processed. In order to make this send/receive transaction work accurately, so you can be assured that you are sending the exact amount to pay your bill, you can convert your bitcoin or other unpegged cryptocurrency to a stablecoin, which has a fixed value of 1 stablecoin to 1 USD, and then pay your bill using stablecoin. This type of transaction can be less expensive than other types of electronic bill payment, and leaves banks and other payment processing providers out of the equation.

So What’s the News About Coinsource and Dai Stablecoin?

It’s already incredibly easy to use cash to buy and sell bitcoin using Coinsource Bitcoin ATMs. Now Coinsource is partnering with Dai stablecoin to add stablecoin to all of its machines this summer in preparation for the launch of a full remittance service. Users will be able to convert bitcoin to Dai stablecoin, and pay bills using Coinsource Bitcoin ATMs.

In addition to being the largest bitcoin ATM operator in the world, Coinsource is the first to add stablecoin to its machines in order to give users the ability to make payments using their bitcoin ATM machines.


[1] https://www.investopedia.com/tech/most-important-cryptocurrencies-other-than-bitcoin/

[2] https://tradingstrategyguides.com/what-are-stablecoins/

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