If you’ve been actively listening to the crypto market, you have probably heard of the so-called “stablecoins”. In case you haven’t heard about them, we’re here to give you a brief overview of what they are and why they are so important in the fintech ecosystem.
One of the main reasons traditional investors reject the idea of entering the crypto market is due to its volatility. We’ve all heard how Bitcoin and other crypto-assets fluctuate, sometimes causing owners to lose thousands of dollars overnight. These investments are very volatile and often leave participants disappointed. However, with the production of stablecoins, the frustration can be eliminated.
Let’s say you want to buy something on the other side of the world. Cryptocurrencies, as they are transacted through the blockchain, are perfect for such activities. Built upon the interaction among technology, community, and liquidity, cryptocurrencies became a way to make super efficient transactions with lower costs in an extremely secure manner. Blockchain provides an infrastructure that is powered by the community, so once a transaction is approved it can’t be reversed. Safety and decentralization have become the main focus for cryptos; this creates an ecosystem where users can transact with any third party knowing the transaction will be completed successfully or otherwise be reversed. It also results in an instant transaction despite physical distance between the parties. To leverage this platform, stablecoins fit perfectly into the picture overtaking Bitcoin in transaction volume on Q1 2021 by $246 billion ($869 Vs. $623).
In very simple terms, stablecoins are the digital representation of the US Dollar, meaning that every coin has a value as close to $1.00 USD as possible. These cryptocurrencies achieve this in different ways, such as being backed by real USDs that are owned by the company that issues the coins like Tether (USDT). Other mechanisms are backing the coins with assets like gold so that its value can always be redeemed by the holder.
One stablecoin that has been a pioneer in the cryptocurrency ecosystem is MakerDao’s DAI. To keep its price stable, MakerDao developed an algorithm based on smart contracts to collateralize the DAI with many different cryptos. It’s stability is achieved by controlling the amount of DAI available in the market, so in other terms, when demand decreases, the algorithm burns DAI or takes it out of circulation. The same happens when demand goes up – the algorithm will issue more DAI into the market so that its value remains stable. That way, no matter how many DAI you own, you know that your purchase power will remain the same.
Furthermore, for the first time, stablecoins are allowing investors to digitize their FIAT currency and ensure its value does not plummet. Then, investors can choose to buy DAI and use it to purchase or invest in different types of assets around the world. This gives an advantage of lower transactional fees as well as the security that blockchain has to offer. One possibility is to look for the latest innovation finance has to offer: security tokens. These are similar to cryptocurrencies in the sense that they exist in the same ecosystem that we described earlier. However, they are completely different in terms of what they represent: security tokens are digital securities. Meaning that their value is linked to a real asset and stored onto the blockchain. In our case, it is real estate, which is an asset as real as they come. When owning one of these tokens you literally own one fraction of a property that can be transacted in the crypto/blockchain ecosystem in a matter of seconds, thus generating liquidity. These tokens have been created with the sole purpose of restructuring finance through technology to make it more efficient, secure, and fluid.
What about making your first DAI transaction through BRET’s tokenization platform? Using DAI among other cryptos such as Bitcoin and Ethereum, you’ll be able to buy our security tokens with a click of a button from anywhere in the world and become a partial owner of a fractionalized property. Additionally, you’ll be entitled to receive dividends generated from the property you invested in and receive them instantly on your electronic wallet. All of this is accomplished by the digitalization of finance.