Innovations in Stablecoins and Their Impact on Centralized Banking Systems

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If there is something that every investor is always afraid of, it is the fact that the crypto space is really volatile. Within a day, it can react to market fluctuations and many more. Sometimes some investor see it as a big discouragement most especially those who want stability in their investments. And for some investors, they see it as a good way to make more profits. In fact, one of the things that make the crypto space to be profitable is the volatility nature.

But even with the volatility nature that can be a blessing Sometimes, it also result to loss of capital several times. This is the reason why there is a creation of stablecoins. Stablecoins were generally created to help gives stability to the asset value instead of it been subjected to volatility. It helps to give a stable value to the asset that is pegged to fiat currency. This really goes a long way to help achieve financial stability.

There is actually a need for us to understand what stablecoins innovations means and the types of stablecoins we have. Generally everyone of them are called stablecoins but nevertheless, they have different types. What I mean is the class the stablecoins of SBD is functioning in is quite different from the class that the stablecoins like USDT functions in. When we are able to know the different kinds of stablecoins we have, it will help us to understand them much more better.

Let me start from the aspect of fiat collaterised stablecoins as they are the most common type of stablecoins. They are used most of the times by banks and huge institutions and one of the example is USDT. Not only that, we have the examples of the crypto collaterised stablecoins as this is also the second type and most common type of stablecoins. Examples of crypto collateralized stablecoin is the Steemit stablecoin which is called SBD(Steem backed dollars).

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Of course when it comes to the types of stablecoins, it is not actually limited to that, we still have different types of them. Examples like the algorithmic stablecoins, we also have the Commodity-Backed Stablecoins. All these are the other types of stablecoins even though they are not really popular as others, but they still serve their own function.

When it comes to the stablecoins most especially in the financial sector, it also offers a lot of impact for the centralised banking system. The good thing about stablecoin is that it helps to give a fresh challenge to traditional banking models. With stablecoins and the fact that it is been used continually right now, I will say it helps to give alternatives compared to the traditional banking system that we have at hand. With stablecoins, it offer fast transaction and also low cost. This makes it an attractive option for payment instead of following the traditional banking system.

The second advantage is the aspect of Influence on monetary policy and financial stability. Most of the time, one of the things that have been limiting traditional banks is that it is under the regulation of central banks monetary policy. These policy I talked about, sometimes it can favour individual and sometimes it can go against them. But with stablecoins not been under any regulations helps to give it a massive advantage. Stablecoins offer these kinds of Decentralised system.

Recently, we have seen the rise of central bank digital currencies. It has been something that was scarce many years ago but now we are having them and it is getting common day by day. This is an initiative by the Centralized baking to stop the use of stablecoins. We have digital currencies but nevertheless they are still backed up by central banks so they still have their own limitations. They run making use of this Centralized system. Of course it has its own advantages and at the same time it has its own disadvantages depending on the angle it has been viewed.

I believe that stablecoins have so much to offer compared to what the traditional banks have to offer and it is just a matter of time before we start seeing it manifesting. In fact I am so sure that it will help in financial inclusion and the accessibility of funds. We will see more use case of stablecoins when it comes to payment years to come. I am so sure of that certainly.

As I conclude, I will like to establish that stablecoins have so much future ahead. That it is not yet manifesting right now does not mean it will not. I see it spreading beyond the use case of crypto space. Stablecoins will be a very valuable tool to be used for the financial system in years to come and those challenges will definitely be tackled with.