The high volatility in cryptocurrency has forced the companies to stop accepting Bitcoins and Altcoins for daily businesses. As cryptocurrencies are trading and transferring from hand to hand, so they do not have a stable value. Moreover, after the crash of the market in January investors are not willing to invest in Bitcoin. Firms are moving towards Stablecoins for their daily transactions. Top of the list is Tether with high current market capitalization. Researchers have a firm belief that the Stablecoins have the ability to solve the market volatility problem. Unlike Bitcoin and Ethereum, they are backed with US dollars or gold reserves.
There are different types of Stablecoins with different backing. Like Tether is backed by USD. These types of Stablecoins are backed by some reserves. Another example is EURS, which is tied to the value of Euro. These Stablecoins fall under the category of Fiat-backed stable coins.
Another type of stable coin is crypto-based in which coins are backed by some cryptocurrency like Havven. There is a type of Stablecoins that are tied with the value of multiple assets, for example, Globcoin and X8 currency, which rely on reserves from different banks. Some stable coins are not backed with any resource they float in the market based on demand and supply.
Stablecoins can be used for commercial use for daily transactions because of their price stability. They are suitable for continuous and repeated payments like for rent or lease and for monthly or recurring payments. Furthermore, they can be converted into cash at any time so that investors can take benefits of high volatility in the market by increasing their profits.
As every mirror has two sides so, Stablecoins also have some disadvantages. They are not transparent. One cannot inspect the reserves on which they are backed. In crypto-backed Stablecoins, if the price of cryptocurrency drops the value of the coin will also decrease. There will be the time come when Stablecoins will become useless instead of its reserve backing. The investors will ignore them soon.
