What is a Stablecoin?
Stablecoins can be defined as cryptocurrencies that are pegged to real-world assets such as fiat currencies, gold or oil. As it’s pegged, the value of the stablecoin keeps stable unlike the volatility experienced in major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH).
With volatility being experienced in cryptocurrencies, stablecoins are much needed in day to day payments. For example, if you are a grocery shop owner and you accept cryptocurrency. If the customer pays you $100 worth of Bitcoin today for grocery, the Bitcoin may not be the same value of $100 tomorrow. If it depreciates you have lost out on your grocery and the profit you expected to make from it. It is the same scenario for a customer who pays in Bitcoin. If he or she needs grocery immediately and the value of Bitcoin has appreciated, the payment too increases and so the customer loses out.
Take the scenario of a stablecoin being used, it does not fluctuate and so the merchant and customer both don’t lose out. Stablecoins are the idea cryptocurrency type for payments to and fro for online and offline transactions.
Asset-backed stablecoins are the ideal stablecoins concerning security. These are stablecoins which are backed by fiat currencies such as USD or a primary asset like gold or oil. The chance of this type of stablecoin fluctuating in value is far less as assets such as fiat, gold and oil hardly depreciate tremendously in value. One good example of an asset-backed stablecoin is MenaCash which is the native cryptocurrency of MenaPay. MenaPay is a Cryptocurrency based payment system for the Middle East and North African markets.
The security of asset-backed stablecoins are much suitable for payments as opposed to crypto collateralised stablecoins which are backed by reserves of other cryptocurrencies. With a stablecoin such as MenaCash being used for payments, it helps inner peace when transacting knowing that there is no loss in the value of the payment.
MenaCash has the ability to be used for both online and offline transactions. One MenaCash is equal to and backed by US $1. The One American Dollar it is pegged to is equal to the amount of MenaCash in circulation and kept in multiple banks as reserves. The wealth is promised to be under protection, which will help merchants to cash out anytime they need without the risk factor.
Therefore users and merchants don’t need to worry about the value of MenaCash and it’s safety. MenaCash brings into day to day life the amazing benefits of digital payments without the problems of high volatility.
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