Is Stable Coin For You? Maybe Soon in WhatsApp
Facebook is stepping up in WhatsApp.
According to Bloomberg, Facebook is planning to create a stable coin for its WhatsApp Messenger.
With its stable coin pegged to a US dollar, it allows people to digitally transfer money.
Facebook will first target India where there are more than 200 million WhatsApp users. India is also the leading consumer in the remittance industry where people have sent $69 billion to India alone in 2017.
But skeptics ask, “Would it be stable?”
Histories of different stable coins would answer that yes, there have been some bumpy rides.
But how have it all worked out?
The Ideal Appeal of Stable Coins
Ideally, one stable coin has a value of one dollar. It’s usually managed by holding a collateral (actual dollars or crypto assets).
Because of its stable price, you can protect yourself from market volatility. By holding stable coins, you don’t lose money whenever cryptocurrency prices fall. For example, you bought 10,000 stable coins with 1 BTC. You now have $10,000. If bitcoin drops into $6,000, you still have $10,000.
Unfortunately, this isn’t always the case.
Ideal Vs Reality
Stable coins can still be affected by volatility. Aside from Nubits, none of the old stablecoins are with us today. Last March 2018, Nubits has been trading for under 50 cents.
According to CryptoCurrency Facts, stable coins add more volatility to the crypto space because “…they allow for more speculation (which in theory creates stability, but which in practice hasn’t really seemed to do anything of the sort).”
But despite the shown fluctuations, popular stable coins like Tether, Gemini Dollar and TrueUSD have stayed around the price of $1 per coin.
Because aside from speculation, there are other factors that affect a stable coin’s stability. This includes “economic stability, token mechanics, the design of the stable coin and the initial traction required to maintain the peg and future stability,” according to Alex T. of CoinJournal.
In this year of 2018, there are over 25 stable coin projects, each one racing to become the most used stable coin by the majority of people.
This is where Facebook’s edge comes in.
The Stable Coin will Facebook Form
Facebook is the first large technology company to launch a stable coin for its messaging app. It has 2.5 billion global users and more than $40 billion annual revenue.
In India alone, it has 480 million internet users, second only to China. It has a huge chance of making a strong stablecoin that would stay.
Facebook is still working out how to protect its stable coin value. Time will tell what type of stable coin they will create.
For there are many types of stable coins.
The fiat collateralized stable coins holds money as a collateral and requires people to trust a third party (which goes against the concept of crypto).
There’s the crypto collateralized stablecoins that are backed by cryptocurrency reserves but cryptocurrency can be extremely volatile.
Then the non-collateralized stablecoins emerged. Most of these systems use an algorithm that expands and contracts the coin supply depending on the coin price. Thus, keeping its stability. Examples of non-collateralized stablecoins are BaseCoin and Carbon.
Trusting Something New
Compared to cryptocurrencies, stable coin can serve as the backbone in the financial aspect of blockchain, especially that some of them are compatible with smart contracts.
Are you open to using WhatsApp to send money?
If yes, what kind of stable coin would you like for Facebook to have: Fiat Collateralized, Crypto Collateralized or Non-Collateralized?
This article originally first on Westrend.