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Which One Wagers the Best: Fiat Currency or Stablecoins?
Shane Addinall posted a post in BlogCryptocurrency is a hot topic among various communities around the world including lawmakers, investors, and crypto traders. Gambling with blockchain-based currencies is also increasing in popularity although it is far from taking the lead against traditional fiat-currency wagers. Of the most debated coins in the crypto collection, are stablecoins and world financial leaders can’t seem to agree on how to deal with them. The primary motivation behind the creation of stablecoins is to provide a less volatile cryptocurrency for exchange. How are these coins faring at providing stable currency and is it a good choice for bets, compared to fiat-based gambling? Let’s explore what stablecoin gambling offers and compare how it stacks up against fiat wagers. Fiat Currency vs Stablecoins We all know what fiat currency is because that is how we transact and purchase goods daily. Fiat has been around for ages, but how does it work and where does it get its worth from? On the flip side, we ask the same questions about stablecoins and attempt to answer these too. The Emergence of Fiat Currency The first government-issued money originated from China in the 10th century, but fiat money as we know it today gradually developed over some time and it wasn’t until the 1970s that it became a global norm. US president, Richard Nixon, decoupled the dollar from gold in 1971 and launched government-backed currency to replace commodity-backed currency. The word ‘fiat’ originates from Latin and means ‘it shall be’ or ‘let it be done’ and all modern fiat money depends on the word of the government that backs it. Fiat currency has no more worth than the paper they print it on, but if the originating country considers it legal tender, fiat is worth whatever the central bank says it is. Money or commodities were a means of storing wealth and transacting for trade or debt and when the gold standard disappeared in the late 20th century, fiat money became the most widely accepted legal tender for transacting. Apart from the availability and acceptance of fiat, governments also gained the advantage of meeting the demands of their citizens by printing more money. Features to Keep in Mind Because a country’s central bank governs fiat money, there is a sense of stability in times of economic turbulence. Storage and management and accessibility of fiat money are fairly straightforward. Thanks to its capacity to store buying power, people easily decide on growth and investment with fiat currency. It is a globally accepted means of trade, and we can buy just about anything with fiat money. Cryptocurrency: A Decentralised Opponent Bitcoin arrived as the first cryptocurrency and decentralised money option with much push-back from the traditional finance sector. Shortly after, more blockchain-based coins arrived on the scene and soon there was a trading market for the sector. Unfortunately, because of the volatile nature of cryptocurrencies, there are few willing to accept them. The reason some adopt digital currencies is that there is no single entity that controls them like traditional financial systems. Decentralised finance (Defi) is attractive to people who want to cut out the middleman, and the costs involved with financial institutions handling their money. Another advantage of cryptocurrency is the blockchain features that make transactions highly secure and swift. Stablecoins Blockchain experts recognised the gap in the market and introduced stablecoins in response to the unfavourable volatile coins rejected by many. The original cryptocurrencies like Bitcoin and Ethereum share a common trait with fiat, nothing backs the value of the currencies. Instead, these coins and their value depends on the basic principle of economics - supply and demand. Stablecoins, on the other hand, resemble money from earlier eras because it has collateral backing. The value of stablecoins depends on what they pegged the specific coin to. External references like commodities or algorithms that determine supply levels, allow these coins to be much less volatile than standard cryptocurrency. They can peg these digital assets to fiat currency, foreign exchange-traded commodities, and precious or industrial metals also referred to as traditional financial investment tools. Sometimes, the stablecoin might have other cryptocurrency backing or non-collateral backing. Features to Keep in Mind Stablecoins are available 24 hours a day via the internet, almost anywhere in the world. Transactions are super-efficient, and the lack of a middleman drops costs substantially. Stablecoins are native online currencies and very adaptable. Transactions only require crypto wallets in the peer-to-peer network. Different Stablecoins In order to stabilise the value of these crypto coins, they maintain a reserve of a commodity as collateral. Four types of stablecoins exist with different collateral to stabilise their value. Fiat-Backed Stablecoins Fiat-collateralised stablecoins are pegged to one, or more, fiat currencies, with the US dollar being the most popular fiat collateral. This category of stablecoins maintains a steady value according to its pegged currency and this should make it much less volatile than the original cryptocurrency. The most popular fiat-backed stablecoin is Tether, and it has the largest market capitalisation, making it the most liquid. Although the coin experienced a big drop in the value of approximately 1% in May this year, it remains the best stablecoin. A major advantage of Tether is that almost all crypto exchanges around the world use it. Other popular choices in the fiat-backed category include two more dollar-pegged coins - USD coin and Binance USD, as well as the Euro-pegged coin – EUROS – which is the largest Euro-backed coin. Regardless of the relationship these coins have with different fiat currencies, some countries prohibit the use of cryptocurrencies and regulators continue to push for Defi regulations. Crypto-collateralised Stablecoins It may sound counterintuitive, but some stablecoins have cryptocurrencies as collateral. When they peg its value to a crypto reserve, the stablecoin is over-collateralised. This means that the value of the pegged cryptocurrency must always exceed the value of the stablecoins issued. An example of this is a coin valued at 1 million will have a cryptocurrency worth 2 million backing it. The insurance against a 50% drop in the value of the pegged cryptocurrency allows for lower volatility while keeping the coin purely blockchain-based. MakerDAO’s DAI is a crypto-backed stablecoin and although it is pegged to the US dollar, Ethereum and other cryptocurrencies worth 150% of the DAI stablecoin in circulation back it. Commodity-backed Stablecoins The third type of stablecoin has its value pegged to physical commodities like precious metals and oil. Collateralised by the values of gold, silver, oil, and sometimes real estate, these stablecoins hold the values of the real-world assets backing them. Preferred by investors with an interest in these commodities, gold and oil-backed coins allows people to easily invest in highly sought-after commodities, without worrying about how they will sell the materials when needed. Examples of these coins are Paxos Gold and Tether Gold. Algorithmic-backed Stablecoins These stablecoins may or may not hold physical reserve assets as collateral. Instead, they differ from normal cryptocurrencies because algorithms control their stability by limiting supply. Essentially, the algorithms and computers that run the formulas play the same role as a reserve bank do with fiat currency. The only challenge with this type of stablecoins is the lack of physical collateral, as felt by the investors of TerraUSD (UST) on 11 May, when its pegged token Luna slumped more than 80% overnight and dragged UST values down by 60%. Online Gambling: Stablecoin or Fiat Wagers? With the convenience, speed, and low cost involved with blockchain currencies, the emergence of crypto casinos was inevitable. Now that stablecoins present a less volatile choice to gamblers, the natural question is whether a crypto casino is better than one that only accepts fiat currencies. Let’s do a quick comparison of stablecoins and fiat to help us conclude: Stablecoins This category of cryptocurrency presents us with a more reliable source of tradable currency making it a highly liquid option. The pegged feature allows for quick conversion from crypto to fiat. Stablecoins present two advantages: the decentralised feature of blockchain technology, plus greater stability from solid collateral. Although stablecoins are better equipped to be a reliable means of trade, few accept it. However, many online casinos that accept cryptocurrency have stablecoin options. Fiat Currency Fiat money is available anywhere and when gambling online, players only need the right type of currency for their region to enjoy a wide variety of casino options. It is a highly reliable currency. The value is determined by central issuers, and this causes stability. They accept fiat currency anywhere and can pay for or purchase almost anything. What’s the Verdict? Depending on the player, both fiat and crypto gambling with stablecoins present advantages. The lower volatility of stablecoins makes it a far more attractive choice in the crypto space and this drives its popularity, specifically fiat-pegged coins. A punter’s preferences determine the verdict here because both options have significant advantages. For the best online casinos, visit our casino guide or check out our bitcoin casino list for the top crypto gambling options.
The Complete New User Guide to Stablecoin Cryptocurrencies
Shane Addinall posted a post in BlogThe world of finance, investment and technology was irrevocably transformed with the invention of blockchain technology and the subsequent development of cryptocurrencies. For the first time, the world was offered a new way of storing data, securing information, and transacting that did not rely on the existing system that put the power and most of the profits in the hands of middlemen. As blockchain adoption grows and the general populace begin to understand the pros and cons of cryptocurrencies it is becoming apparent that a daily digital currency is needed, and stablecoin could very well be the answer. Clarifying What Stablecoin Is Stablecoin is the future of global monetary systems are they represent the best use of blockchain and crypto-technology while offering countries a stable digital currency devoid of the fluctuations prevalent in decentralised investment currencies. YouHolder clearly defines this new variant of cryptocurrency as: “A stablecoin is a currency pegged to another asset and acts as a practical way of using cryptocurrencies while being stable, secure, and convenient for transactions avoiding the highly volatile nature of traditional cryptocurrencies.” By building a daily use token on the same security, provability, and smart contracts as Bitcoin, Ethereum and Dogecoin a country can seamlessly convert its paper money into a digital version that retains its local commercial value but offers far more benefits and security to the user. What Collateral Secures Stablecoin? The stability of stablecoin tokens is ensured by basing the value of the coin on one of the following asset types: An existing fiat currency – Simply put these are virtual currencies that base their value on a one-to-one exchange with an existing fiat currency. An example of this would be the Digital Dollar where one Digital Dollar is worth one US dollar. Precious metals – These stablecoin tokens base their value on the store of precious metals like gold and fluctuate their token value based on the price of a predetermined mineral. Other cryptocurrencies – While this is less common there are some tokens that base their value on the value of the cryptocurrency platform they are built on. This is seen with stablecoin’s using the Ethereum platform. Collateral free coins – Coins that become official government tender would fall into this category. These tokens are not valued based on a fiat currency or asset but draw their value from being the Central Banks monetary offering for that country. Why Bitcoin is Not a Stablecoin The reality of this new technology is that decentralised investment products such as Bitcoin, while they hold the allure of a modern-day gold rush, are not able to effectively function as a day-to-day transaction method. This is due primarily to the extreme volatility of Bitcoin and its peers, volatility which is driven by limited supply and the impact of public opinion on its perceived value. It is this low volume and reliance of market opinion that allows Tweets by Elon Musk to crash Bitcoin’s value by 30% in a single day. Stablecoin, however, combines the technological benefits of crypto-technology with the inherent stability associated with a centralised currency backed by a tangible asset such as gold, art, or even a fiat currency like the US dollar or Euro. Stablecoin is the Future of Global Economies At present there are several countries that are invested in launching a digital version of their local currency to advance the adoption of this new technology: Dubai – While Dubai does not consider Bitcoin legal tender it has launched its own cryptocurrency, DubaiCoin (DBIX). DubaiCoin is expected to become the regional method of transacting both locally and globally, with Dubai intending to become the “first blockchain-powered government”. America – The non-profit Digital Dollar Project is testing several programs over the coming year to help the country launch its Central Bank Digital Currency. It will become the official form in which the Centra Bank issues money to citizens and for trade. China – The Chinese government is rolling out the Digital Currency Electronic Payment (DC/EP) system, which is essentially a digital Yuan. The project is Beijing’s attempt to protect their “currency sovereignty and legal currency status” while creating a trade environment not dominated by the US dollar. Russia – The Digital Ruble prototype is set to launch late in 2021 and based on user and central bank feedback is being eyed to become Russia’s primary currency within three years. India – While India is aggressively anti-Bitcoin, the Reserve Bank of India (RBI) announced that it is currently developing an official digital currency for the country which will be regulated by the central bank. The pressing need for many countries is to facilitate buying and selling on a micro and macro scale without the need for paper money. There are several reasons for this need including secure trading in a world where hacking and digital theft are commonplace, instant international financial transactions, massive reduction in the cost of local and international banking, tracking, and reporting on all transactions on the network, being able to move away from maintaining a physical cash ecosystem and finally the health benefits of contactless transactions in a post-Covid world. How Can You Use Stablecoin in Daily Life While country-level currencies are a high-end use case for stablecoin technology here are some of the day-to-day uses of this unique token: Paying your rent and buying groceries Sending money overseas to family Easily paying for goods when travelling abroad Legal gambling in regulated markets Investing locally and internationally Paying for medical costs Given how the blockchain works it would also be possible for transacting with an approved central currency to mine the blockchain for cryptocurrencies. Rather than the current interest system using the network would reward you with more crypto. Cryptocurrencies and the Environment The surge in value and subsequent interest in cryptocurrency led to concerns over the environmental impact of the technology. Primarily concerns have centred around: Increased drain on electrical grids Burning through large quantities of fossil fuels Massive volumes of carbon emissions To put some of these concerns in perspective, Bitcoin mining alone uses more electricity in a year than the whole of the Netherlands for the same time period. While this negative attention did cause a dramatic decline in cryptocurrency values it has also been the driving force behind the mobilisation of crypto miners in pursuit of sustainable and renewable crypto mining. This initiative is being spearheaded by Elon Musk (Tesla) and Michael Saylor (MicroStrategy) who formed the Bitcoin Mining Council with the intention of addressing “climate issues and decentralisation”.