Stable coins prices could stimulate the adoption of crypto payment applications, but the technology is still questionable
The Need for Stability
In the world of cryptocurrencies, the need for stability is not unique. Any currency that is used as a trusted means of exchange must be successful. to be used as such. The more that coin prices rise and fall, the more than ordinary people will be reluctant to use coins for their everyday transactions in the future.
People have not yet become accustomed to thinking of cryptocurrency as real money, whether they are hoarding coins in the hope that prices will rise dramatically soon or refraining from using them altogether for fear of losing all of their value.
The unpredictability of prices, on the other hand, hurts regular money services such as remittances, currency conversion, and the use of ATMs. Businesses must charge exorbitant fees to be able to use cryptocurrencies because they must hedge their risks.
Why is it difficult?
Price volatility has been a problem for Bitcoin almost since its inception. In light of the knowledge we have accumulated over the last half-decade, why have cryptocurrencies failed to resolve the issue of price fluctuations?
As is often the case, human nature gets in the way. The ability to maintain price stability is difficult in a world where people would rather gamble on the stock market and gain immediate gratification by reselling their coins at the highest possible price. It is difficult to recover from the effects of cryptocurrency speculation unless careful planning is undertaken from the very beginning of the cryptocurrency’s existence.
What can be done?
- Predicting Demand
The ability to predict demand with reasonable accuracy is the first piece of the puzzle. Price fluctuation is primarily caused by demand uncertainty, which arises from the fact that every user’s intentions are a mystery to every other user. Having a method of determining the actual demand for a coin would go a long way toward resolving this issue.
The problem with predicting demand, on the other hand, is the existence of speculators who artificially inflate demand. This is the crux of the problem: because there is so much speculation, the price of a cryptocurrency will not reflect its actual usage and demand, resulting in a decrease in value. Because it has become an inexorably inflating bubble, no one wants to put their hard-earned money at the risk of being squandered on it.
- A community
What if there was a currency that incentivizes people to work together instead of competing? But what if people were motivated by a desire for growth rather than a desire for wealth? According to the optimal outcome, a system of collaborative businesses and industries would work together as a single unit to provide services to their members. This cooperative would have a democratic say in the design of the coin (shaped not controlled). Every user would be rewarded for contributing to the overall growth of the network, and the use of a blockchain would help to ensure that the process is fair.
To buy and sell the currency, users would instead go to a local exchange rather than engaging in rampant online speculation. The public as a whole would vote on when to raise the coin’s price, which would keep stuff progressive while also preventing sharp price spikes.