Why stablecoins? Inside one of crypto’s most important use cases

Theres more to crypto than Bitcoin and Ethereum. Just ask USDT, USDC, and DAI, the three largest stablecoins. Together, these three stable assets represent over 10% of the total market capitalization of the digital assets economy.

Their importance in the ecosystem is underscored by their ubiquity in trading — both on-chain and on exchanges— and by their sheer volume. Everyday, over $25 billion worth of stablecoins change hands.

So, why stablecoins？ Here, well answer the $124 billion answer.

What are stablecoins？

Stablecoins are — as their name suggests — tokens pegged to the value of stable assets. Stablecoins serve an important role on blockchains and exchanges by helping people access the safety and security of a real world asset.

There are over $124 billion worth of stablecoin assets as of August 2023, and the most popular stablecoins track the U.S. dollar. However, there are stablecoins pegged to the value of other currencies and real world assets (RWAs) like the Euro or gold.

All stablecoins are generally backed by real holdings of assets such as short-term treasuries, cash, physical storage, or over-collateralized loans

Why stablecoins？

Bitcoin will always be 1 Bitcoin, but not everyone's comfortable transacting in an asset which changes in value all the time. Bitcoin might worth $30,000 today, $20,000 tomorrow, and $60,000 next week.

For some, that volatility — and uncertainty — can be too much. And even HODLers might take after traders by selling high-flying assets after a spike in price. Thats the core benefit of stablecoins for blockchain participants: they offer liquidity, certainty, and safety for users of major blockchains and exchanges.

For many, that makes stablecoins a sort of ‘safe haven’ on blockchains, especially for users in emerging or more volatile markets. The economic fallout from the COVID-19 pandemic troubled the economies and currencies of various emerging and developed markets. One side effect, inflation, has been particularly troublesome for residents of numerous countries — many of whom have turned to stablecoins and self-banking to escape the rapid devaluation or censorship of their money.

This lesser-considered use case is an increasingly valuable one for stablecoins. Given the nature of the blockchain, self-custodying stablecoins are sometimes a safer bet for people in countries facing economic woe.

What stablecoin is best？

Not all stablecoins are created equally, but the most popular stablecoins can provide a less rocky road than HODLing volatile assets.

• USD Coin, or USDC for short, is considered by many to be one of the safest stablecoins because it's issued by a U.S. based company which holds U.S. dollars through short-term treasuries and bank accounts.

• However, the most popular stablecoin, Tether, is also considered to be good given its high liquidity and widespread acceptance.

Ultimately, your choice of stablecoin is up to you. There are some prevailing reasons why the ‘king stables’ have remained on top for so long that are worth considering, though.

What can I do with stablecoins？

If you‘re holding a trusted stablecoin — like USDC — you can probably rest easy knowing that it’ll likely be worth a dollar. That will remain the case so long as its issuer, Circle, maintains its reserves.

Alternatively, you could stake stablecoins on various DeFi protocols. Though there are various risks that come with staking your assets, you could earn rewards. One easy way to find and stake your stable assets is through Centralize Exchange.