Save in Stablecoins
Today, we are looking at Stablecoins. What are stablecoins? How can you purchase them? And what can you use them for?
Bitcoin is the cryptocurrency everyone has heard of and that is because it is the largest when ranked by market capitalization- this just means it has the greatest total value. But Bitcoin is notorious for its volatility.
This price volatility is something that exists in crypto because of how new the asset class is and with time it is likely to become more stable. But until then, what do more risk-averse investors do to participate? They participate through stablecoins, which is sound money.
Money has three central functions: - to act as a store of value - to act as a medium of exchange - to act as a unit of account Bitcoin is an excellent store of value long term, but short term, due to its price volatility is very unreliable and therefore does not make a good medium of exchange (payment for goods or services) or unit of account (reference point for the value of goods).
What are Stablecoins?
Stablecoins were introduced to address the problems with price volatility within crypto. These are digital assets pegged to the price of an asset, typically the dollar, which retains its value and offers a stable store of value, a steady unit of account, and a reliable medium of exchange. So a stablecoin is a digital currency pegged to a stable asset such as the dollar, designed to address the volatility issues prominent within crypto. Today we are going to look at one of the most popular stablecoins and its use cases.
An Example USDC
USDC was created by Circle in 2018 and is a full reserve digital currency. This means that every digital dollar of USDC is backed up by cash and short term U.S. treasuries. Treasury bonds or treasuries are a loan from citizens/ companies to the United States Government. Therefore owners of USDC can always exchange their digital stable coin at a 1:1 ratio for U.S. dollars. USDC publishes the attestation for the value of its reserves every month to prove that it is a full reserve currency. There is currently $55 billion of USDC in circulation and as an ERC20 token it is compatible with lots of major blockchains networks such as Solana, Avalanche, TRON, Algorand, and Polygon. It is not limited to just the Ethereum network.
How does it Work?
Keeping a digital asset pegged to the dollar is a technical process, for this article, we are just going to outline the basic structure of USDC’s creation. Trust and transparency are essential for a successful stablecoin, and USDC’s success has been driven largely by its openness and routine accounting updates. To create a USDC token, one dollar must be deposited into Circle’s Vault, and whenever a USDC is redeemed for a dollar, that USDC token is destroyed to maintain a constant backing.
How to Purchase USDC
The easiest way to purchase USDC is through Rio! Use this link here to purchase USDC using a debit card, bank transfer, or cash.
What to use USDC for?
As USDC is a stable digital asset it can be utilized in more ways than traditional cryptocurrencies. We have put together a list for you! 1. International Transfers of Value Being a digitalised dollar USDC represents a faster and more cost efficient payment rail for sending funds globally. For example sending money to another country can take several days and you would have to pay fees, sending USDC from one wallet to another takes minutes and is far cheaper. 2. Getting Paid We mentioned earlier that stablecoins introduce a stable store of value, making them ideal to be used as a medium of exchange. Imagine being paid in Bitcoin and in six months your salary payment has been cut in half. USDC can be used to pay for services, and the receiver is protected against volatility but can also use the USDC to buy other crypto assets if they choose. 3. Access Other Digital Assets USDC facilitates a way for crypto investors to maintain a cash position and remain in the crypto ecosystem. Accepted on nearly every major exchange, USDC allows investors to hold their money in dollars or invest in other digital assets. It is the perfect entry point for trading crypto.
Save in Stablecoins
Stablecoins, or digitalised dollars, provide far more opportunities than a regular dollar. Owners of stablecoins can earn interest on their assets by lending these tokens on DeFi (decentralized finance) platforms for far higher rates than those offered by standard bank savings accounts. For example, you can use yearn or aave. Stablecoins can also be bought from anywhere in the world, and as inflation worsens, more and more people are turning to stablecoins to preserve the value of their wealth. People who live in countries with double-digit inflation are buying more and more stablecoins to hedge against inflation. Stablecoins retain the value of the currency they are pegged to and can be bought anywhere in the world, can be sent anywhere in the world, can be used as a hedge against inflation, and can be used to generate revenue. These factors make it a great digital asset and a perfect vehicle for saving. In a nutshell, they are the improved version of the dollar more suited to the digital age we live in.