Getting started with blockchain | One of the stable coin series: Why do we need stable coins?
Why do we need stable coins? To figure out this problem, we must first know what the stable currency is.
Wen Xiang knows why the stable currency is unstable? From the meaning of the stable currency, it is mentioned in the article: The stability of the stable currency actually refers to "the stability caused by anchoring to money or specific assets."
In this regard, we can extend the concept of stable currency, which is a digital currency with a fixed value that is decentralized and issued in a specific way, anchoring money or specific assets. This fixed value can be denominated in dollars, gold, and the like. Different anchoring methods constitute different stable currency modes.
Based on this definition, the stability of the stable currency refers specifically to the stability of the exchange of anchored assets, for example, a 1:1 exchange of USDT and USD. Although the market price of usdt is affected by the supply and demand relationship, the price always fluctuates around 1 US dollar, but his value is 1 US dollar.
This stability is undoubtedly unstable for three reasons:
First, the stable endorsement of anchored assets requires a credit endorsement by the token issuing organization.
Tether is committed to a stable exchange of USDT, but this credit endorsement is likely to collapse with the collapse of the issuing organization's credit, such as Tether's thunder, which is a high probability.
Second, the legal currency and specific assets anchored by the stable currency also require credit endorsement.
The fiat currency is legally identifiable and endorsed by the government and changes with changes in government politics, economy, etc.
The above two points are the double credit endorsement of the stable currency I mentioned. Endorsement is two-fold, and the risk is superimposed. Therefore, it is not meaningful to invest in a stable currency anchored by the legal currency. It is better to invest directly in legal currency.
Third, the stable currency is also affected by the relationship between supply and demand in the market. If the supply is less than demand, the price of the stable currency will rise.
Prices always fluctuate around value. As the volume is not large enough, the demand for the digital money market has increased the demand for stable coins. The current market stable currency price volatility is still relatively high.
At present, due to government supervision, ordinary people need a stable exchange of digital currency channels. Most of the existing stable coins are also based on this. At the same time, in our daily life, we also need a digital currency with stable value for daily payment.
The price of bitcoin often rises and falls, has no value-measuring features, and will not have a visible future. Why not have the function of value measurement? Because he is unstable.
This is reflected in two aspects: First, it is not safe. Since the birth of Bitcoin, it has been filled with doubts about its security all the time. Will Bitcoin die? Will 51% of attacks occur? This is a topic that has been placed on the lips of countless people. In the last bear market, this performance is particularly evident, and bitcoin beliefs are in danger of collapse. But after crossing a few waves of bulls and bears, the security of Bitcoin is gradually recognized, but it will eventually disappear, and no one can tell.
Second, the volatility is large, and the skyrocketing is its normal performance. It is possible to increase several times a day, or to fall more than half. You take a bitcoin to buy a biscuit, and bitcoin will rise several times tomorrow, you are certainly not happy. Similarly, Bitcoin plunged the next day, and businesses are certainly not happy.
Based on these two main reasons, Bitcoin is currently difficult to pay for circulation in the market, so taking 10,000 bitcoins to buy pizza can only be a case and will always be recorded in textbooks. Tell you, this is a stupid consumption, which also made the most expensive pizza in history.
Bitcoin is like this. Other unsteady types of project tokens are even more so. The security is not as good as the bitcoin that implements the POW consensus. The life expectancy is shorter, some are only a few months, the possibility of zeroing is greater, and the price fluctuation Sex is more intense than Bitcoin. Other tokens are less suitable for circulation into the market as a daily currency.
The future of GRIN may have this possibility. At least this constant output, the design of continuous issuance is exciting. After the early high inflation, the inflation rate will approach zero for a long time, and there may be good market performance in the future. . Regardless, GRIN's encryption technology and economic model are currently a very good experiment.
In life, when we ask how much the price of a car, we ask how much the car is, not how many bitcoins this car has. This is the difference between the legal currency standard, the cash standard and the currency standard. Based on different ideas, it will naturally have different performances.
At present, the acceptance of the currency-based thinking is still a minority. With the increase of bitcoin fans, this trend will be more and more. But this process will be quite long. This is related to the degree of recognition of digital currency, and let the people accept and recognize that digital currency must first have the function of payment function and value measurement. In daily life, only when it is used frequently can it be known and accepted by ordinary people.
Bitcoin obviously does not have this function. In contrast, stable currency is more acceptable because of its stable value. Just develop a stable coin payment function, for example, a payment project stable coin pay! That is the global Alipay. What can be used for this thing, can buy food, can buy a car, easy to use, brush a brush, sweep, globally.
In order for ordinary people to accept, the stable currency must be anchored to the law with a small price volatility. At present, due to China’s concealed attitude towards cryptocurrency and the dominant position in the US market, most of the stable currency is anchored by the US dollar. Take the stable currency USDT as an example. How much is a USDT value? one dollar. What is the value of this car? 10,000 usdt. The role of value measurement is reflected.
Anchoring the dollar is only the initial stage of the development of stable currency, and it is also the stage for ordinary people to enter the digital currency market.
At present, the biggest application of stable currency is to bridge the gap between French and digital currencies, making it easier to invest in digital currency.