Do you know what a Stablecoin is and why it is important to the rise of Cryptocurrencies? In the minds of Stablecoin creators and supporters, it all comes down to bridging the gap between traditional currencies or fiat and Cryptocurrencies.
Through the example of Tether, despite the controversy that seems to consistently surround it, it is fairly easy to see that Stablecoins lower the barriers for new users to adopt Crypto, especially for trading.
From Bitcoin’s inception up until very recently when the first Stablecoin projects came to be, exchanging one Cryptocurrency for another was never an easy process. As the industry has developed, so has the practice of grouping Crypto projects by whether they are exchangeable with Bitcoin or Ethereum. If you want a contemporary example of this in practice, take a look at Abra, Shapeshift, and Changelly and test out their services for yourself.
Even without finalizing a transaction on these websites, it is easy to see that some exchange pairs just do not work unless you constantly have a store of Crypto’s two top currencies.
In one way, the is where Tether comes in. In being pegged to the US dollar, it has in turn, pegged itself as the solution for users to truly easily use fiat currencies on the Blockchain.
Even so, this proclamation is optimistic at best, especially with the continuing saga surrounding its inability to prove the dollars that supposedly back every Tether coin that is created.
This, in turn, has definitively created new opportunities for other Stablecoins to step to the front of the line, so to speak.
Most of them, however, are not connected to traditional currencies as directly as Tether claims to be. In addition to this, based on traditional financial indicators, none even come close to Tether’s relatively leading position on the market.
Maker DAO’s DAI is one of the few that do, given its already widespread acceptance by industry leaders like Binance. Even so, they have faced their share of criticism, especially due to their supposed underlying structure being based on derivatives, which some say crashed the global financial market ten years ago.
Despite this, Andreessen Horowitz, the Venture Capital firm that is run by Marc Andreessen of Netscape fame, has invested $15 million to gain a 6% stake in Maker DAO’s DAI coin, as of yesterday.
As to why they did this, Rune Christensen, MakerDAO’s CEO, was quoted as saying that AH’s support means being able to lead the project in a more efficient way towards its goal of becoming the most adopted Stablecoin in history.
Now, all that remains is to see if the three years of support that the VC has pledged can do the trick to bring this about.
By: BGN Editorial Staff