It was only a century ago that the value of gold was surprisingly high enough to be used as a medium of exchange. Gold, Silver and other minerals arrived in the same period to be used as a currency market. When metal was considered hard enough to sell citizens switched to some suitable central fiat currencies. Initially, the metal fiat currencies were backed by the gold standard and the 16th centaur was one of a prosperous age for it. Earlier paper money was also bound to gold until 1971 when the US government restricted the salvation of gold.
The definition of capital has now shifted. Quality does not rely on anything and is excluded from any value of the underlying property. It’s your decision how do you see the value of a paper note. Trends towards money changed again when Bitcoin was introduced in 2009.
When capital redefines itself again in the form of tokens, it has become the latest developments in the asset class. A digital format written in code, cryptocurrencies are still not ready for mass adoption until the system regains its liability. The decentralized monetary system may be of use to investors and offers a high return on investment, though volatility lies below the crypto-trading market.
Cryptocurrencies are now dealing with a major issue called stability. As digital currencies are volatile in nature and this property holds crypto away from mass adoption, another alternative is needed. Decentralized, blockchain-based digital currencies need to find a solid foundation for funding in order to find security and transparency.
There are two solutions that will steer volatile cryptocurrencies in the path of stability. Whether the cryptocurrencies are backed by fiat money or gold standard, this strategy can return to the resilience of digital currencies.
How Fiat and Gold have backed cryptocurrencies?
Essentially, the gold-backed tokens are the interest synonymous with the gold standard. A sum of gold could be deposited, and then the money is backed by a different price of gold. The cryptocurrency backed y gold will depend on the price of gold. The fluctuation of the gold standard would allow the exchange level to be disrupted.
Likewise, when fiat currencies are used to back up tokens, the same volume of money would be deposited in a safe. As the US dollar is one of the most appropriate currencies on the international platform, cryptocurrency developers use US dollars to ensure stability.
Will this new approach to cryptocurrencies storage give the longevity that cryptocurrencies lack?
One thing is for sure, cryptocurrencies are volatile on the sector. Any small incident could have an impact on the value of the cryptocurrency. Gold and Fiat backed cryptocurrencies are an innovation on the blockchain platform to restore the sustain platform to the crypto market.
If the value of the coin is directly proportional to the gold and fiat money, it will act accordingly. As the ETF’s futures carry physical gold, the value remains in it, and the gold-backed cryptocurrencies stay in place.
How is the world accepting gold and fiat invasion of blockchain technology?
Blockchain innovates daily and extends its divisions to a number of industries. But Cryptocurrency is the first invention of the cryptocurrency system, now this technology is widely accepted. World welcomes any new attempt to expand blockchain technology. If gold and fiat could be the solution to fix the cryptocurrencies, the public will give it a chance.
Several countries are planning to launch their state’s stablecoins from gold and fiats processing. Even the leading country and most popular crypto networks choose gold and fiat for cryptocurrency backing. It shows how people perceive the idea of gold-backed cryptocurrencies.
Now I’m going to talk about the big fiat and gold-backed cryptocurrency networks recently launched or about to launch:
When we’re talking gold-backed cryptocurrencies then the first thing that comes to mind is the latest Bitfinex news. Bitfinex is the major exchange site carrying 399 cryptocurrency markets that are now planning to launch a stable gold-backed coin.
This trading platform has already revealed futures and leverage trading to its customers. Now, this new cryptocurrency will bring balance to the trading platform. Bitfinex’s CTO, Paolo Ardoino said, “It is important that people can see the father value of having cryptocurrencies rather than just trading back and forth bitcoin and USD or whatsoever.”
While the company already has leverage over 100X and derivatives trading, options trading is expected to join the queue in the coming year. Tether Gold, a gold-backed coin, is another major project that will enter the market by the first half of 2020.
Cryptocurrency Company, Paxo, which already has a stable coin, has launched a new cryptocurrency for PAX gold customers. This cryptocurrency is glued to a troy ounce of gold that is stored in London’s safeguard. Troy Ounce is a gold measurement unit equal to 31, 1034768 grams as the U.K. Royal Mint said so.
PAX gold market cap rose from zero to nearly $6 million within four days. This gives instant stability to the PAX gold market. This also shows the reason for consumers accepting the new safe coin on the market? Sounds very good for PAX money, but new more gold-backed cryptocurrencies are about to come in 2020.
The PAX gold token does not come for free. Storing gold is quite expensive, so the cost of holding it will be passed on to paxo’s customers who have ever been dealing with PAX gold. Chad Cascarilla, CEO of Paxos, said it is the simplest and most economical way to own gold by PAX gold. And also Chad told, “It’s a token backed by gold rather than a token backed by just computer bytes.”
For example, China’s national cryptocurrency, which will be strictly controlled by cryptocurrencies, will be backed by gold. Like China, many cryptocurrencies are planned to create gold-backed cryptocurrencies for stability reasons.
Fiat Backed cryptocurrencies are a similar way to address sustainability issues surrounding cryptocurrencies.
The most common cryptocurrencies backed by USD are tether, TrueUSD, DAI, Paxos Standard, Gemini Coin, etc. These are cryptocurrencies that have a share of a stable coin market. The price is always close to one dollar, as it is pegged to USD. While each of these coins is from 2018 or before that, a newly launched stable coin is JP morgan Coin which is introduced in the market this year.
In 2019, JPMorgan Chase & Co. decided to enter the world of crypto. JPM or JP Morgan coin is one of the first attempts to implement the other project. However, the JPM token with a similar dollar value is not available to everyone. This unique token was specially designed for customers of JPMorgan. The aim is explicit that it would make a trade within the JPMorgan network smoother and more efficient. Whether or not this coin is available to all, it’s still hazy. As the project is still under development, we could hope that JPMorgan was working on a stable coin and that JPM was an experimental approach.
Why is it really necessary to build stable coins?
Stable coins are the reason for the mass growth of the crypto industry. What do you think that is binding cryptocurrencies for global adoption? Institutional investors are not willing to bet on their company’s share in bitcoin or some other highly unstable cryptocurrency. Stable coins create a bridge between investors and crypto firms, reducing the mistake within the blockchain technology.
Higher price swings do not guarantee a stable market for any cryptocurrency. Stable USD-backed coins are capable of providing stable price stats of around a dollar value. Valuable to many institutional investors for quick crypto-to-fiat trade without any delay.
More stable coins on the market will increase the stability of the market. And in the future, a stable market will accelerate mass adoption.
Is the stable coin restoring the bitcoin liability?
The main reason behind cryptocurrencies ‘ infidelity is that they are not successful stable, resulting in huge losses occasionally. Traders were faced with losses due to price fluctuations in cryptocurrencies. Stable coins covered the greatest threat around them, restoring the belief in the cryptocurrency. As secure coins are spaciously backed by gold or some fiat currencies that can be trusted. And the price fluctuation rate of these coins is minimal, as they are bound by physical assets. Essentially, this depends on the value of gold or the euro. For example, if the dollar value is stable, USDT will do the same thing.
Several countries are looking for a stable cryptocurrency with full regulation. That uses the blockchain technology and uses every advantage of it, but also excludes all the drawbacks of it. From the point of view of legislation, accountability, longevity, everything should be scrutinized and the state must release a more sustainable coin in order to improve the future.