Will Stablecoin replace Bitcoin?

 

 Currency has been a major part of human evolution. Initially, it started as a barter system. In 110BC currency got its mold when an official currency was mined. After that in 1250, AD gold inflated florins were introduced across Europe. Later on, in 1600 AD-1990AD paper currency gained widespread popularity as an evolved modern currency.

Modern currency includes paper currency and coins, credit cards, digital wallets like Amazon pay, PayPal, etc controlled by centralized regulated authority.

Currency has always been controlled and issued by centralized regulated authorities like RBI in India, FRS in the USA. But have you ever thought that one day there will be a currency without a centralized regulating authority covering all the modern banking problems?

Yes here we come to our topic CRYPTOCURRENCY 

The first decentralized cryptocurrency, bitcoin, was created in 2009 after a major economic depression by presumably pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, in its proof-of-work scheme. In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. 

Mr.Nakamato believed that people are giving more control than required to the centralized authority about their money which in order lead him to create bitcoin. To be honest Mr.Nakomato was indeed right the last demonetization occurred in 2018 lead 86% of paper currency to go waste just because of the same reason. As demonetization wouldn't have been that worse if people don't give that centralized authority to the government about their own money.

Before getting directly in the war Stable coin V/S  Bitcoin. Let's have a minor introduction about cryptocurrency. As both Stable coin and Bitcoin are just a type of cryptocurrency.

Consider a scenario,

You are in debt of some amount to your friend. It's the end of the month and you are paying that cash through an online bank transaction.

There is 3 number of possible outcomes that the transaction can go wrong.

1.A technical issue at the bank

2.Your friend's account getting hacked

3.The transfer limits for the account were exceeded 

Here the future of currency lies with cryptocurrency

In the same scenario through a bitcoin app. This covers all the problems of modern banking there is no limit in the transfer of funds, there is no centralized authority controlling it, no chance of an account being hacked.No wonder as the number of users of cryptocurrency across the globe are 100 million.

BITCOIN:

Bitcoins can be used to buy merchandise anonymously. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Some people just buy bitcoins as an investment, hoping that they’ll go up in value. People can send bitcoins to each other using mobile apps or their computers. It’s similar to sending cash digitally. They are mined by solving complex math puzzles.

Transaction through bitcoin has zero costs and it's decentralized most importantly it makes international transactions much faster. The details of the user are anonyms. When compared to stable coin it's much popular. Even leading brands as Telsa are accepting this currency in the mode of transaction.

STABLE COIN:

A stable coin is a cryptocurrency pegged to a relatively stable asset. A stable coin is an attempt to create a cryptocurrency that isn't volatile and is pegged to real-world currency also flat currency. As in its name stable, it has a stable value of 1 USD  when compared to volatile bitcoin. It was launched by a collaboration of companies circle and coin base in 2018

A perfectly engineered stablecoin is the key to achieve all three essential properties of a currency.

• Medium of exchange (ability to trade goods and services without bartering)
• Store of value (means of maintaining wealth over time)
• Unit of account (measurement unit to define and compare market values)

• Stablecoins achieve their price stability via collateralization (backing) or through algorithmic mechanisms of buying and selling the reference asset or its derivatives.

• Stablecoins attempt to bridge this gap between fiat currencies and cryptocurrencies. There are three categories of stablecoins, all based on their working mechanism.

In order to survive stable coin in the market company should follow 2 necessary thin
1. TRUST (Collateral):

Even in paper cash, it is written that I hereby promise to pay the amount of 200 rupees with the signature of the RBI governor. As stable coins are initially issued by companies l there are responsible to provide statements in form of a certificate that this is collateral of a specific amount. Until unless they don't recognize the value the public is not gonna believe or start investing in stable coin.

2.Supply (Algorithm):

One stable coin= 1 U.S.D

In order to maintain that price company should keep issuing a stable coin, a small increase or decrease in supply will lead to disruption in the value.

Even leading companies like VISA and Facebook are going to launch stable coins as their company currency. Visa is going to start a credit/debit card on it and Facebook is going to issue stable coin under the name Diem. 

BITCOIN V/S STABLE COIN:

Bitcoin is mined by computers whereas a stable coin is engineered by a specific company it can be specified as their own private currency too in case.

In bitcoin, there is no centralized party plus they hide their user's identity which is even leading to easy storage of black money some news even states that bitcoin is even involved in terrorist activities. Stable coins are centralized not through a government centralization but a kind of private centralized which makes it far away from such scam.

Bitcoin cannot be used in day-to-day transactions because of its price fluctuations, Whereas stable coin can easily be used in day-to-day activities the only problem is that a stable coin is not yet famous in the market as a mode of transaction.

But will it replace bitcoin permanently the answer is kind of a mix of yes and no because there are already 5392 types of cryptocurrencies in the market they differ from each other only by their cons you never know after some years there will coin that will sound more useful than stablecoin and bitcoin itself? The second scenario is as said earlier companies like visa and Facebook are issuing their own stable coin the only drawback is it is not yet famous and widely accepted in the market as of now, if companies like Facebook and visa try to issue stable coin more or traders/retailers in coming future accept it as the mode of transaction in daily transactions more in number then it will definitely replace bitcoin one day. Even experts suggest their traders to invest in stablecoin rather than bitcoin in order to sustain the fluctuality of market