The case of Tether shows that fiat currency and cryptocurrencies have found an option that allows them to complement each other.
A revolution does not always imply an immediate and total break with what already exists. There is no shortage of innovations which, without losing an ounce of their transformative momentum, end up associating themselves with traditional resources and concepts. In the case of cryptocurrencies, this is seen in a new generation of currencies, based on the technology block chainwhich is not aligned with the guidelines set by a national central bank but which has in common with traditional money (or “fiat”) the search for stability.
The stablecoins (stable cryptocurrencies, in Spanish) represent that space where crypto and traditional currency have found a way to complement each other. On the one hand, stablecoins meet the essential characteristics that we expect to find in these digital currencies: they take advantage of the technology block chain; they are not issued by a central bank; they can be used to purchase goods and services; and they are very good at making transfers globally that are reliable, fast, and inexpensive.
However, it is in the territory of differences, when it comes to options such as bitcoin or ether, that the connection to fiat currency arises. Most of the typical cryptocurrencies (to call them somehow) are subject to fluctuations in supply and demand, hence their price marked by constant fluctuations.
The stablecoins, on the contrary, anchor their value in a traditional asset, and among them, one of the most used is the traditional currency. This is how we can find stable cryptocurrencies whose value, in a ratio of one to one (1:1), is linked -for example- to the American dollar (USD), the euro, the peso Mexican, Peruvian sol, among other currencies.
Of course, this crypto will be sensitive to price changes recorded by the respective currency in global markets. But such fluctuations are not comparable to those currently experienced by many cryptos, the value of which can be installed on a roller coaster of ups and downs.
Use in Latin America
Tether is one of the most popular stablecoins in the world. This stable cryptocurrency is generated and managed by the company Tether Limited; This is a detail that many members of the crypto community resent, since although Tether is not issued by a central bank, it is a crypto currency that is controlled by a central entity.
Tether has four versions linked to fiat currency: USDT (US dollar), EURT (euro), CNHT (Chinese yuan) and MXNT (Mexican peso) – in all cases the parity is 1:1. USDT, due to the dollar’s dominance in global markets, is its most popular stablecoin. In fact, among all cryptocurrencies (according to CoinMarketCap rankings), USDT consistently ranks in the Top 5 of the market.
Its concept of stability and connection to well-known traditional currencies has resonated well with consumers. For example, in Latin America, USDT is increasingly used to protect savings in countries with very high inflation (such as Argentina or Venezuela) and to send funds. In a region heavily dependent economically on remittances, USDT has become a very useful resource for making international transfers, based on a strong traditional currency and with an affordable cost per transaction.
Although Tether Limited does not offer specific details about its business in Latin America, some experts estimate that of all crypto operations in the region, stablecoins account for 24.5%, with USDT accounting for the most volume. important. It is even claimed that globally, USDT is 50% of all transactions with stablecoins.
As the case of Tether shows, beware of false dilemmas: it is not always a question of choosing between crypto and fiat. If you’re interested in joining the future of economics, but don’t want to say goodbye to the stability factor you find in traditional money, the crypto world has that option for you.
Next Generation Cryptocurrencies
Beyond fiat-backed cryptocurrencies, the trend for next-gen cryptocurrencies is taking hold. Among them stands out Unicoin, a cryptocurrency designed to avoid the extreme volatility that affects first-generation digital currencies. Unicoin is the official cryptocurrency of Unicorn Hunters, a reality show from “enrichmentin which high-growth companies position themselves.
* Content in collaboration with Unicorn Hunters with information from CryptoConnection.