The crypto world has introduced numerous improvements over classic fiat currencies, including enhanced security, lightning-fast transfers and the absence of third-party involvement. However, after 14 years, traditional cryptos still struggle to remain stable and reliable. To answer this ever-present volatility in the crypto market, the world was introduced to stablecoins.
Stablecoins include all the mentioned benefits of crypto but also provide the stability of fiat currencies with their innovative design. With their unique features, businesses can enjoy the best of both worlds. But are stablecoins the Pareto improvement over other currencies in business payments? Let’s discuss.
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Before exploring the specific advantages of stablecoins, let us discuss their nature in detail. Stablecoins share all the classic benefits of standard cryptocurrencies, but with one major difference – they are tied to a particular stable asset (Gold, USD) on the market. Fixing a stablecoin to a certain commodity is called a peg. With this approach, stablecoin valuations are effectively tied to their respective traditional assets, drastically reducing the standard crypto volatility.
Stablecoins were created to bridge the gap between the fiat and crypto worlds. It is widely known that cryptos are highly volatile and unpredictable, so many individuals avoid adopting them. Stablecoins change that status quo by minimizing the volatility of crypto and keeping all the unique advantages. With air-right blockchain security, a completely decentralized structure and the stability of traditional fiat currencies, stablecoins are on their way to becoming a dominant crypto payment gateway for businesses worldwide.
How Stablecoins Can Improve Your Business Operations
For a long time, businesses across the globe have avoided crypto solutions due to their unstable nature and frequent price variations. However, the introduction of stablecoins is an excellent reason to re-evaluate adopting crypto payment gateways. With their mix of crypto benefits and stability, stablecoins are swiftly climbing the ranks in the global financial environment as a dominant payment solution.
Global Access and Near-Instant Transfers
Despite numerous advancements in digital technology, classic fiat currencies are still quite limited when it comes to international transfers. While local money transactions are often straightforward, cross-border transfers take much time and demand hefty fees. Even simple money transfers on the international stage might take several weeks to go through, and they come with a bloated price tag.
On the other hand, stablecoin transactions are swift and seamless in comparison. Unlike fiat transfers, stablecoin transactions do not require multiple inspections from third parties, as they utilize a single payment gateway. As a result, stablecoins can be processed and sent in a matter of minutes or a couple of hours at most. These periods are near-instantaneous compared to fiat transactions. Now, businesses can operate with enhanced freedom, having the ability to transfer and receive funds swiftly and without delaying their daily operations.
Low Transaction Fees
As discussed in the previous section, fiat currency transfers go through several third-party gateways before going through. This complex system of federal banks and regulatory bodies can produce an unfair price tag on simple transactions. The reason for this is that each counterparty requires its share of the commission, which then accumulates as a significant fee.
Conversely, stablecoins only require a single fee for their transactions since there are no multiple third parties involved. With stablecoins, you only have to pay for the crypto gateway processing, which is drastically smaller than the fiat equivalent.
While above-mentioned benefits can also apply to other cryptocurrencies, stablecoins manage to achieve discussed benefits without having inherent price variation risks. Due to their value being tied to particular commodities or well-established currencies, stablecoins prices do not fluctuate unpredictably. Therefore, your business will have no problems with sudden price changes that affect money transfer processes.
Freedom to Customize Your Payment System
Stablecoin payment systems offer a myriad of customization options. From unique payment setups and supplier chain management to seamless modification of revenue stream flows, stablecoin systems can flawlessly accommodate your liquidity and cash flow preferences.
Aside from these core competencies, stablecoin systems have numerous bonus features to further personalize your unique payment setup. With these generous offerings, businesses can truly make the stablecoin payment systems their own.
Which Stablecoins Are the Best Options for Your Business?
Currently, USDC and USDT stablecoins are clear-cut market leaders due to their stability and proven track record. Both of these currencies are backed by USD and have similar features. On the other hand, we have the DAI stablecoin, which avoids utilizing USD as its stabilizing financial asset. Instead, DAI backs its value with a diverse portfolio of other cryptocurrency tokens. So, which of these two choices is best to implement as your new payment option? Let’s discuss.
USDT is, without a doubt, the more popular choice since it is the oldest and most respected stablecoin on the market. USDT offers enhanced stability and predictability due to being directly pegged to the US dollar. With this method, USDT will simply always move with the USD price changes, letting individuals have strong expectations of future price fluctuations. Additionally, USDT also offers low fees and swift global transfers. However, these benefits come with considerable costs. Since USDT is tied to USD currency, it has lost the decentralized nature of blockchain. As a result, USDT is more centralized and less anonymous than other crypto solutions on the market.
On the flip side, we have the DAI stablecoin that has kept the anonymity and decentralization of blockchain but struggles to offer the same level of stability. DAI stablecoin is not tied to any standard commodities or currencies. Instead, DAI is backed by a set of other crypto tokens on the market. Naturally, this makes the DAI currency less stable since it fails to perfectly replicate the USD prices.
Additionally, DAI currencies require a substantial investment. Obtaining a DAI amount requires investors to put other crypto assets as collateral. In most cases, the collateral amount required can stack up to as much as 300% of the desired DAI currency. Naturally, this requirement has discouraged many individuals from utilizing the DAI coins.
Conclusion: Dai vs. USDT
DAI and USDT currencies can be viewed as two sides of the same coin, as they offer a lot of the same benefits but have drastically different offerings when it comes to centralization and stability. While DAI coins are much less centralized and don’t require third-party involvement, USDT currency offers a higher level of stability, lower transaction fees and instant transfers. Thus, there are no obvious answers when choosing the perfect stablecoin to implement in your business.
Everything comes down to the specific requirements and preferences of a given business. Some companies might value low transaction fees, while others are interested in avoiding third-party intervention. So, to select the perfect stablecoin system for your needs, you must analyze your business goals, processes and other variables and decide what is best for your success.