Stablecoins seen as steady cryptocurrency against price volatility
LONDON As the extreme volatility of cryptocurrencies makes them difficult to depend on for day-to-day use, another type of virtual currency is gaining popularity: stablecoins.
Seen as more steady because they are pegged to traditional currencies such as the US dollar, stablecoins have been a quiet crypto success, even though questions remain over their reliability.
The total value of stablecoins in circulation has more than doubled to US$3 billion (S$4 billion) from US$1.4 billion over the past year, according to a study by Blockchain, a firm that offers wallets for digital currencies.
Cryptocurrencies are now rarely used to buy products and services because of their wild price swings, as they dramatically soar or plummet depending on the speculative interest of the moment.
But this volatility could all change thanks to stablecoins, according to Mr Garrick Hileman, head of research at Blockchain.
"They can solve real problems," he told AFP.
According to Mr Tom Shaughnessy, co-founder of cryptocurrency consultancy Delphi Digital, a reduction in volatility would allow consumers to buy simple things like a cup of coffee.
In a sign that stablecoins are gaining in credibility, US investment banking giant JPMorgan Chase earlier this month unveiled a prototype for a digital coin system using blockchain, known as JPM Coin.
A total of 26 stablecoins currently exist, while a further 28 excluding JPM Coin are in development. The leader stablecoin in terms of tokens in circulation and value is tether, which is designed to always be worth US$1. - AFP