The importance of the stablecoin

Ogres are like onions and stablecoins are like risk-off assets.

Fiat currencies and assets that are known for holding their value, like bonds and gold, are called risk-off assets, and stablecoins are crypto’s answer. They’re frequently backed by fiat like the US dollar and the Euro.

And while they may be secure and private like cryptocurrencies, they can’t be decentralized in the same way. Some stablecoins do their best to be as transparent as possible by opening themselves up for third-party audits, while others share detailed information about how they work to create trust with users.

Despite these caveats, stablecoins are still very popular as a way to hold money. Especially if you’re planning to use that money in the crypto marketplace. By storing your money in a stablecoin you’re pretty much guaranteed to incur less transaction fees than you would if you were to convert money from USD to crypto and back to USD again.

And because of some of those caveats from above, stablecoins may just be the first crypto-adjacent coin to make it big in the mainstream. DeFi (Decentralized Finance) is already using stablecoins for lending, storing and moving money in the crypto-sphere and now traditional banks are considering getting in on the action and minting their own stablecoins. They could start allowing crypto into banking transactions and increase the ease for people wanting to make purchases with stablecoins.

Stability is important, so is balance. For a few relevant fun facts, scroll down 👇

What *else* I learned while researching this newsletter:

#1. Facebook's cryptocurrency, Libra, is now a stablecoin — at least for now. A lot of regulatory issues popped up during the crypto-creation process, mostly aimed at stopping them from making one decentralized blockchain-ed coin to rule us all.

The changes they made to comply with the rulings led to its transformation into a centralized, dollar-backed stablecoin … which you still can’t actually buy … but they’re working on it.

#2. Sweden is in line to be our first truly cashless society. A study from researchers at the Copenhagen School of Economics found that the breaking point for when the cost of cash-handling will outweigh the benefits in the country is 2023.