It is no secret that for all their benefits and innovations, cryptocurrencies are still too volatile for most potential users worldwide. To alleviate the volatility concerns without sacrificing the speed and efficiency of crypto, the blockchain world has created stablecoins.
As of 2023, stablecoins are breaking new ground for cryptocurrencies, providing a crypto product that has managed to keep all the benefits of blockchain while avoiding the ever-present volatility. Now, the question of the day is whether stablecoins are a good investment for your business. Let’s discuss this further.
Stablecoins utilize the same stabilizing approach as some of the fiat currencies. They are tied to a certain commodity (gold) or other currency (USD) in order to maintain their stable value. This way, stablecoins have a predictable and reliable worth since their valuation is directly fixed on a given traditional asset, rendering stablecoins immune to the rest of the crypto volatility.
The stablecoins are designed to alleviate the volatility concerns on the crypto market and encourage potential customers to convert. With stablecoins, businesses worldwide can harness all blockchain benefits without suffering from significant volatility risks. This mix of top-notch security and the decentralized nature of blockchain with the reliability of traditional currencies makes stablecoins a go-to crypto payment gateway for interested businesses.
What Can Stablecoins Bring to Your Business?
With their unique blend of benefits and advantages, stablecoins are making rounds as a dominant payment option for businesses worldwide. By merging the new and old currency methodologies together, stablecoins are on the way to becoming a force to be reckoned with in the global financial landscape.
Global Outreach and Short Transfer Time
While globalization and the digital revolution have produced many benefits for the worldwide population, some industries are dragging behind. For example, it has never been easier to travel the world, as individuals can purchase a ticket to any destination in a matter of hours and be there in a couple of days. However, these individuals might have difficulty taking their money with them as international transfers have become increasingly complex and cumbersome.
With stablecoins, that is no longer the case, as you can seamlessly transfer funds between any two points worldwide. No more delays, excessive fees and overwhelming paperwork involved. Stablecoins utilize crypto payment gateways to handle money transfers securely, swiftly and without bloated transaction fees. This is one of the primary reasons that stablecoins have become so popular worldwide – enabling users to move their money effortlessly across borders.
As mentioned above, stablecoins are not just good for saving time in money transfers. They also absolve users from excessive fees tied to each money transaction. In the fiat world, each transaction must flow through numerous banks and regulatory bodies, each taking its share of service fees along the way.
These costs can stack up to a massive amount, in some cases equalling the principal transferred amount. With stablecoins, that is no longer the case, as the payment goes through a single check within the crypto payment gateway. Therefore, the fee is singular and much lower compared to traditional fiat options.
Thus far, we have discussed the benefits of stablecoins that are similar to other crypto solutions. However, other crypto means often have inherent price variation and volatility risks related to them. Stablecoins do not share the same risks, as they are tied to certain stable commodities on the market. Therefore, you can have reliable expectations on each transfer, as the price will not fluctuate dramatically during the money transaction process.
Generous Customization Opportunities
Businesses that adopt stablecoins payment gateways can seamlessly customize them to fit their specific company needs. From supplier chains to customer relationships and financing solutions, stablecoin payment systems can swiftly mould to your exact preferences. Aside from these core features, stablecoin systems accommodate numerous loyalty programs for your customers and a plethora of other features to expand your business capabilities.
Exploring the Best Options in the Stablecoin Landscape
As of 2023, two dominant options on the stablecoin market are USDT and USDC. Both currencies are backed by USD. However, we also have a third distinct option on the market – the DAI stablecoin that houses other crypto tokens as their stabilizing asset. So, which of the two approaches is a preferred investment for aspiring businesses?
USDT is a flagship stablecoin product that delivers on the initial concept almost flawlessly. This currency has chosen USD as its reserve currency, ensuring that USDT moves in complete harmony with the USD currency fluctuations. With this approach, investors can safely expect that USDT will be exactly as reliable as the well-established USD currency. Tether, the company that established USDT, has an HQ in Hong Kong, surrounded by leading financial experts to monitor and control USDT stability. The management of USDT is highly transparent, with regular third-party audits and disclosures updating their target customers on the status of USDT.
Conversely, DAI stablecoin is backed by a diverse portfolio of other crypto tokens on the market. Created by MakerDAO, DAI currency has selected an optimal set of crypto tokens to stabilize its value related to the US dollar. DAI uses several advanced algorithms to ensure its value stays fixed with USD without directly being tied to it.
To obtain the DAI currency, individuals need to stake a certain amount of crypto assets as collateral. The proportion is at least 150% of crypto collateral compared to the desired DAI amount, but due to overall market volatility, it is advisable to provide at least 300%.
Summary: DAI vs. USDT
With DAI, individuals receive a stablecoin that offers low credit risk and high decentralization. Since DAI is not tied to a centralized currency, it accommodates the core principles of cryptocurrency better than USDT.
However, DAI remains more volatile since it is not directly pegged to a stable commodity. On the other hand, USDT offers small transaction fees, seamless accessibility and the privilege to swiftly exchange its currency with USD. But, due to being fixed with a fiat currency, USDT has an inherent counterparty and credit risk.
So, there are no obvious answers to selecting a perfect stablecoin currency. It all depends on your specific business needs. Therefore, it is best to understand both currencies deeply and weigh their benefits in the context of your unique business conditions.