STABLECOINS INSTEAD OF ICO NEW HYIP TREND IN 2019

Updated: 02/01/2019 11:52
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Learn about the future of stablecoins, their variations, number and difference to ICO, which is now moved out of trend

Against the background of ICO fees falling in the cryptocurrency sphere, a new trend is starting - stablecoins. Tired of volatility, the market is waiting for the emergence of more than 100 new tools. Will it save the industry from constant leaps and what are the prospects for stablecoins? We will try to find answers to these and other questions in this article.

Outgoing ICO

The era of easy money at ICO has come to an end. Such a conclusion can be made on the basis of the dynamics of the collection of funds over the past year. Many rating agencies and research firms cite their numbers: among those whose data are close to the truth is a score from ICORating and TokenData. Regardless of the calculation parameters, the trend is obvious.

In November, in comparison with the most productive month of 2018, ICO fees according to ICORating fell by 86%, and according to TokenData - by 97%. The undermined confidence in ICO projects against the background of a solid share of scams and falling rates of cryptocurrencies did their job.

However, the ICO recession has become a trigger for the development of one of the cryptocurrency market segments - stablecoins. It's about cryptocurrencies, the price of which is stable relative to the entire market.

Coming Stablecoins

If you look at the historical retrospective, when the market falls, investors are shifted to more stable assets. And it's not about the cryptocurrency market, the volume of which is not even comparable to the capitalization of Apple or, say, Amazon. It's about the features of the global capital market.

During the 2008 crisis, record-breaking injections into US Treasury securities were recorded, which were traditionally regarded as the most risk-free investment option. The same is true in the cryptocurrency sphere - during periods when there were the sharpest drops in Bitcoin and Ethereum, the purchases of stablecoins were growing.

Much more compelling evidence of the growing popularity of stablecoins is the growth in the number of new startups in this area.

According to the researches of the popular crypto-wallet Blockchain.com, despite the fact that there are currently 23 stablecoin projects, 34 more projects are under development.

It is important to note that one such startup can release several stable cryptocurrencies at once, when one, for example, will be pegged to the dollar, and another one to the euro. For this reason, the real number of stablecoins that will appear in the near future may be more than fifty.

The growth in the number of new projects is associated not only with the growing market demand for stable cryptocurrency assets, but also with the shaken reputation of the most popular stablecoin - Tether. In theory, the value of its USDT token should be equal to 1 US dollar, although in October, amid problems with foreign currency collateral, the USDT rate reached $ 0.92, which is 8% below the required price. lower than the required price.

The Future of Stablecoins

According to Blockchain.com, the total capitalization of existing stalecoin companies is $3 billion, i.e. about 2% of the cryptocurrency market. Taking into account the needs of the financial industry in stable, low-risk, but decentralized assets, the figure of 2% has great growth potential.

There are 4 types of stablecoins:

• Stablecoins secured by fiat funds;
• Algorithmic stablecoins;
• Stablecoins secured by turnover;
• Stablecoins secured by cryptocurrency.

1. Stablecoins secured by fiat funds

This type of stablecoins is the easiest for people, who don't know much about the cryptocurrency sphere to understand it. It's about the coins that are secured by fiat funds.

For example, Tether, whose USDT token is pegged to the US dollar. This is the most popular stablecoin, which, by capitalization, is in the top 10 world cryptocurrencies. 66% of existing stablecoins are pegged to the US currency. But the industry’s future is hardly behind this type of tool.

In fact, all stablecoins tied to fiat money are nothing more than a digital bank receipt, not a cryptocurrency. This is an electronic evidence that a particular bank or banks have a specific amount of money in dollars, euros, or other fiat money. For some cryptocurrencies, these receipts cause no doubts (Gemini), and for some people they do: as Tether (making a statement about storing money in a dubious offshore Deltec bank.)

Such stablecoins are too centralized and the founders of these coins can "burn" or "freeze" tokens at any time: as evidenced by their own documents (it is enough to become familiar with the code of the smart contract of stablecoin, for example, the Gemini project).

2. Algorithmic Stablecoins

Algorithmic stablecoins do not depend on any pledges. The offer and the target cost here is controlled only by the program code. Such stablecoins are decentralized (without the possibility of third-party regulation) and have high scalability, since they do not require additional security while the supply grows.

However, in practice, there are very few working examples of such projects. Most recently, one of the developers of the algorithmic coin Basis, who collected $133 million, announced his intention to return the money and close the project (it should be noted that Basis did not have time to start, remaining at the Whitepaper stage).

3. Stablecoins secured by turnover

This type of stablecoins is a bridge between the real economy, the trade between countries and cryptocurrency, which carry the principles of decentralization and transparency. Unlike coins tied to fiat money or algorithms, their value is provided by the turnover.

One of the few such projects running on its own blockchain is the MILE ecosystem, which includes MILE and XDR coins. While XDR is a stablecoin, which is tied to the SDR (Special Drawing Rights of the International Monetary Fund, whose value has changed by about 11% over the past 30 years), MILE is a volatile coin, a kind of XDR demand index.

4. Stablecoins secured by cryptocurrency

The fourth type of stablecoins binds its value to other cryptocurrencies. It would seem illogical to seek exchange rate stability where it is not now - on the cryptocurrency market. However, back in 2013, BitUSD was launched, a pioneer and the brightest representative of stablecoin with a cryptocurrency pledge. The stability of the coin gives excessive collateral, which just absorbs the fluctuations in the price of the coin on the basis of which stablecoin is issued.

The future of this type of stablecoins is questionable, since they interact in no way with the real world and act in a kind of way in a vacuum, separately from the real economy. As for BitUSD, the project founder left the project a long time ago and there is practically no one to develop it, while other stablecoins secured by cryptocurrency can hardly be found.

Conclusions

In 2019, the largest increase in liquidity can be observed in the cryptocurrency that is applicable in the real economy and will help to enter the market for large institutional capital.

The death of hundreds of different coins has proved that it is impossible to become a value without real use in the economy. In order to have value for the real sector, the coin must definitely have a stable exchange rate. People do not need "pumps and dumps" so much as trading, as well as an effective and cheap way to transfer money.

The most popular Bitcoin cryptocurrency is not suitable for the real economy sector due to its volatility, although it is not going anywhere. The niche will be occupied by those stablecoins that will be fairly decentralized, open and convenient for ordinary people and investors.


About the author

Brett Sherpan has been working for seven years writing and editing for online and print media. He has held various editing and copywriting positions and can quickly and competently write copy for sales, marketing and editorial content. Brett is a consistently dependable team player, who thrives in a high-pressure environment, enjoying the challenges of meeting deadlines and am comfortable researching, writing and editing on a wide range of topics
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