Why Stablecoins Are Seen as an Inevitable Trend in the Cryptocurrency and Financial Worlds?

Stablecoins can reduce friction between cryptocurrencies and fiat currencies, and even for the global economic system, we need a unified stablecoin.

Original Title: "Stablecoins: What They Are and Why They Are Inevitable"
Author: Sir John Hargrave
Translator: Zi Ming
Editor: Roy Wang

"Proceed as if success is inevitable." I often use this proverb when discussing the blockchain industry. "Inevitable" is one of my favorite words, as I believe that in the age of the Internet, the arrival of blockchain is inevitable.

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Philadelphia Federal Reserve Bank President Patrick Harker recently stated in an interview that stablecoins are "inevitable." In an interview with the Wharton School, he said:

"I think stablecoins do have a real advantage, apart from BTC and Libra. It's hard to use a token that's fluctuating in value. For example, when we go to Starbucks, we don't even know how many tokens to use that day! Clearly, stablecoins will have a long-term advantage in such situations over time.

This is just my view, representing a minority. But from my personal perspective, central banks around the world need to seriously consider issuing central bank stablecoins.

I think it's inevitable. Because we're not going to stop the march of technology, and we should be thinking deeply about this issue now."

The process of exchanging between "traditional" currencies (such as the US dollar) and "digital" currencies (such as BTC) is still very slow and expensive.

People often ask: "If we are to create a new digital currency, why peg it to existing currencies like the US dollar? Why not just use the dollar directly?"

The first reason is: The process of converting currency from fiat to digital is both slow and expensive. Here, we have a real case study about the thriving development of the stablecoin Tether (USDT) in China.

The legal status of digital currencies in China is complex, simply put: they can be legally owned but not easily purchased. For a large number of users who use digital currencies (such as traders), purchasing BTC with RMB is impractical, and vice versa.

Most Chinese digital currency traders simply store their value in stablecoins. As reported by CoinDesk, under the lead of Chinese traders, the trading volume of USDT has surged to historic highs, including not just marginal users but also early evangelists. Therefore, in a sense, Harker's "inevitable" prediction about stablecoins is actually underestimated, as they are already among us.

Traders are always at the forefront of economic development, and this forefront often foreshadows what is to come. With more fund managers incorporating digital assets into their portfolios, stablecoins like USDT are not just an interesting innovation, but rather a "logical existence in itself." And this seems inevitable.

In summary, exchanging funds between fiat and digital currencies is slow and expensive. Stablecoins provide a way to preserve value that is cheaper and easier than the back-and-forth exchange mentioned above.

"One money for one world."

Although today's political landscape still has complex rhetoric, most of us understand that we live in a global economy. Factors affecting one country will impact all countries in one way or another.

This is why the economy is so hard to predict: the economy of each country affects the economy of every other country. It's like a scientific experiment with 200 different variables, where all variables are like raindrops falling on the smooth surface of a pond, constantly echoing and reverberating with each other.

Sometimes someone throws a stone into the pond (trade war), and then we can see its impact on the world economy. We must keep in mind that what we see is a model of global economy (a pond), not a series of interconnected micro-economies (independent puddles).

From this perspective, why do we need different types of currencies? In fact, it can be said without exaggeration that money is flowing globally at the speed of light. The exchange of currencies between the euro, the dollar, and the renminbi was a historical behavior before the internet appeared. Back then, we had to communicate through telegrams, travel by ship, men wore top hats, and ladies carried parasols.

To quote Patrick Harker: "You can see that while most money in the world is digital, it's still central bank money, so it's not a big leap. But where it could be different is in the method of creating these stablecoins. Again, I'm not sure how we're going to do this, and I'm not sure when we're going to do this. But I think we should start to seriously think about it."

I really think I should pay him for these great statements, and that will definitely be in the form of stablecoins.

We live in a global economy, where every event affects all of us.

Now more than ever, we need stablecoins because we need a Token that is suitable for the global population; we need a Token that is suitable for all humanity; we need a Token that is suitable for the global economy.

As Harker said, most of the money is already in digital form. It's not the paper money in your wallet, but the digital currency circulating on the internet. The difference is that we are not continuously transferring those digits from one system to another, but simply creating a unified system.

If we were to use beads and stones instead of dollars and euros, we could easily see that our system is inefficient. Our current system is like beads and stones. We need a global standard that applies to all countries: the "global currency" of Earth's people.

A unified stablecoin standard will further open up trade, provide channels for those without bank accounts, and herald a new era of prosperity and wealth. With a blockchain-based "global currency," we can create the same digital currency for people all over the world, and we will all benefit from it.

In short, a stable global digital currency makes the flow of funds simpler and easier, which will help our global economy thrive.

However, Harker did not call for the United States to take the lead in this matter. Here, the culture of banking and finance is combined with the culture of technology in a strange combination.

I often describe blockchain as the meeting point of finance (suits) and technology (hoodies), with few who understand both fields simultaneously. And blockchain is the intersection of this Venn diagram.

In the field of technology, leading companies rarely leave a second seat for others. For example, if you have the speed and foresight of Microsoft, you can lead the PC software revolution; similarly, if you have the speed and vision of Google, you will lead the information revolution; if you have the speed and vision of Uber, you will lead the shared riding revolution. In the tech world, if you wait for others to lead the technology (perhaps because you are hesitant or unsure), you will never become the first. This is because technology has a network effect. In simple terms, it accelerates like a snowball early on until it becomes too heavy and fast to stop.

Blockchain also has a network effect. China is preparing to launch its own digital currency, and using this digital currency may make exchanges between fiat and digital currencies easier, which could attract all Tether users to use it. Among all major economic powers, China may achieve this snowball effect.

Once China participates in this digital currency game, other major economic powers will inevitably follow in China's footsteps. Because China takes the lead, it will be in a leading position in this field due to the snowball effect.

From then on, every country seems inevitably eager to create its own blockchain-based digital currency, but it's like everyone just realized the value of the internet in the 2000s, because you simply cannot afford to be left out. But that's just the beginning, as we want a global blockchain standard.

Similarly, we can be inspired by many current blockchain projects. Those strong international alliances, such as Hyperledger and the Enterprise Ethereum Alliance, often keep the snowball rolling, while those who fight alone will have no place in the field.

Therefore, what we need is a strong international financial leadership alliance to start studying a universal stablecoin, that is, "One money for one world." The United States still has the opportunity to take the lead in this field, but other countries also have the same opportunity to seize the initiative.

For the country that first establishes this universal stablecoin ("global currency"), please continue to strive towards this goal. As the saying goes: "Proceed as if success is inevitable."

This article is authorized for reprint by ChainNews, article source: ChainNews (ID: chainnewscom)

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