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  • Stablecoin and tokenization: what is the relationship between these innovations?

Stablecoin and tokenization: what is the relationship between these innovations?

The world of possibilities of cryptocurrencies and blockchain is fascinating for anyone who wants to break with market patterns that make no sense in a globalized economy . In this context, stablecoin is gaining increasing prominence.

And why does this projection happen?

Digital currencies suffer from resistance from many people to high volatility . As an example, bitcoin started 2021 at $30,000 and ended the year at $46,000 after reaching $60,000 and dropping below $30,000!

While attractive to bold investors, this scenario does not please those who prefer assets with stable medium and long-term performance and an agile means of payment, without intermediaries, fees and taxes.

How to serve this audience and maintain the attractiveness of cryptoassets ? The answer lies in stable digital currencies , which bring together the backing of real and more stable assets with monetary use in business.

BLOCKBR brings this article where we are going to talk about stablecoin , its benefits and how it will become increasingly present and attractive in economies!

WHAT IS A CRYPTOCURRENCY?

Cryptocurrencies are basically digital money , encrypted files that emerged to break with the centralized monetary system in governments and bank control and make transactions more agile.

Bitcoin and all the digital currencies that came after it had as their main objective to speed up payments and reduce costs using decentralization – not having intermediaries between sellers and buyers, everything is done with software and digital wallets.

However, over the years, cryptocurrencies have reached highly volatile investment status, alienating small and/or conservative investors and jeopardizing their advantages as a means of payment.

Stable coins emerged to occupy this space more securely and, consequently, expand their use in business.

WHAT IS A STABLECOIN?

A stablecoin (or stable digital currency ) is an encrypted file whose price lacks the volatility and speculative degree of cryptocurrencies such as bitcoin .

To work this way, these currency tokens are pegged to real assets , whether fiat currencies and goods, and can be used to:

  • Digital payments through the most stable value, linked to the asset;
  • Investments less susceptible to speculative attacks.

The trend is the increasingly widespread use of these currencies as they offer more stable investments and the decentralization characteristic of cryptocurrencies , reducing bureaucracy and costs.

In addition, stablecoins are backed by real assets , which conveys credibility to investors.

WHY IS IT BETTER TO BUY THE ASSET INSTEAD OF STABLECOIN?

Stable digital currencies have their value backed by known and stable assets , but many people question: isn’t it simpler to invest directly in the dollar, for example, instead of buying stablecoins anchored to it?

In theory it may seem so, especially for those who already have the habit of buying and selling dollars , but precisely here lies one of the greatest benefits of stable coins : it is not necessary to have the asset physically backed.

If you have a volume of currencies pegged to the dollar , you have the same amount of fiat currency that you would have if you kept it in a safe and when you want to transact, just use your stablecoin balances .

With that, you get:

  • More agility: you remit the value without intermediaries, as the transaction is peer-to-peer – directly between the parties and their digital wallets ;
  • Cost savings: transfers are made without bank fees and taxes.

With this, it is possible to invest more safely and trade in the way that the modern world demands!

WHAT TYPES OF STABLECOINS ARE THERE?

WHY IS IT BETTER TO BUY THE ASSET INSTEAD OF STABLECOIN?

CENTRALIZED STABLECOINS

Also called IOU (I Owe You or, in Portuguese, Eu Devo A Você), these tokens have an owner, an issuing company and are usually pegged to fiat currencies such as the dollar and the euro.

If, on the one hand, they fluctuate in appreciation with state currencies , which are at the base of the countries’ economies and are intensively monitored, there is not much clarity on the guarantees of reserves of these companies to support the issuance.

That is, it is essential to trust the issuing entity of the cryptocurrency . It is estimated that 90% of the stablecoins on the market are paired with the US currency. The best-known case is tether (USDT).

CRYPTO-COLATERALIZED STABLECOINS

They are tokens backed by cryptocurrencies such as ether (ETH). The decentralization of digital currencies addresses the issue of trust in their issuer. On the other hand, they are subject to the high volatility of these cryptoassets , suffering large price variations.

NON-COLATERALIZED STABLECOINS

It is the unbacked tokens, whose price is maintained by algorithms, that control issuances of stablecoins to maintain the stability of their value in the market.

COMMODITY-COLATERALIZED STABLECOINS

They are the most innovative in the stablecoin market , as they are backed by real assets such as precious metals, credit rights, rights to future crops, works of art and real estate developments, among many other goods.

This type of stablecoin offers a wide range of possibilities and can bring businesses of all sizes and segments closer to a much larger universe of investors.

The price of the asset will be reflected in the variation of the token’s value , so it is an option, most of the time, for those who want to invest and not as a protection of wealth.

IS IT POSSIBLE TO USE STABLE COINS ON EVERY REAL ASSET?

Yup. Every type of real asset can be pegged to a stable digital currency and benefit from agile and secure tokenization , from gold reserves to crop futures rights.

In addition to an increasing number of companies using stablecoins to tokenize their assets, governments in several countries are also investing in this technology.

As an example, the Venezuelan government created the stable coin Petro to offer oil reserves and raise funds for projects.

It is important that the company specialized in offering stablecoins on the market makes an in-depth assessment of the asset, the legal aspects it needs to comply with and the cost-benefit ratio.

WHAT IS THE RELATIONSHIP BETWEEN STABLECOIN AND TOKENIZATION?

Tokenizing assets is a rapidly growing trend in the most varied market segments, as it brings together the possibility of capitalizing projects with the agility and security of the blockchain .

For companies holding the assets, stablecoins are a great opportunity to add value to the offering, distributing the remuneration to investors through a stable coin .

There are other important benefits for those who tokenize assets with stablecoins .

  • Backing in real assets strengthens confidence in the environment;
  • Blockchain has the highest security protocols;
  • Trading can take place non-stop on the blockchain ;
  • There are no value limits or conditions for investors;
  • There are no bank fees, taxes and fees;
  • Asset fractionation allows more people to invest;
  • It attracts an audience interested in the advantages of digital currencies, but without the speculative character of the most common cryptocurrencies .

As we can see, tokenization and stablecoins bring together security, agility and stability with gains for issuers and investors in tokens!

Want to know more about tokenizing assets and capitalizing on your projects?

BLOCKBR Digital Assets is a fintech that combines technological innovation and digital knowledge to transform physical assets into digital ones, in the asset tokenization process.

The offer of tokenized physical and financial assets, both current and new, is democratic and decentralized, which makes investing safer, simpler and more efficient.

We enable, structure, issue and offer tokens on our platform and beyond. Be aware that tokens depend on feasibility and regulatory factors.

Do you want to tokenize your business or part of it? Do you have a business solution and does it make sense to issue your own token ?

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