Stablecoins - What is it and why would I hold it? The Next-Gen Blockchain!
Photography Credit: Fabian Blank
Fiat currencies owe their mass appeal to the popular perception regarding there simplicity and understandability. The word ‘blockchain’ drives a common man away even before he gets a grasp of it. Stability and world’s acceptance of cryptocurrencies would increase once cryptos are able to adjudicate against their falsely-hyped futility. Well-researched and well-funded marketing can go a long way in establishing their dominance. Additionally, simpler user interface, can help to increase cryptos’ user base (e.g., the way Google scored over Yahoo, owing substantially to its perceived simple user interface against a cluttered Yahoo home screen).
All features apart, speed of transfer and low transactional costs are the two main pillars for deciding a cryptocurrency’s mass appeal. Stable cryptos, like Kowala, are making long strides on these fronts. As of March 26, 2018, Ethereum has an average transaction fees of $0.347 (compared to PayPal’s 2.9%+ $0.30 USD for sellers) and Kowala has clocked around 4000 transactions per second (compared to around 1000-2000 transactions per second of credit card companies).
Stablecoins like Kowala’s kUSD are pegged to the US dollar and are hence resistive to volatile and speculative price fluctuations seen in traditional cryptocurrencies (like bitcoin). Due to it’s decentralized Blockchain technology, Kowala scores over Tether and a few other stablecoins in that it’s not subjected to government whims and centralised administration’s lags.
Unique Selling Propositions (USP) that set stable cryptos over volatile-cryptos
Stable cryptos like Kowala involve leasing of mUSD mining rights, which can help stabilise the time-variant difficulty of blockchain mining and lessen the usage of energy-wasting mining hardware (by consuming not even 1% of energy consumed by bitcoin for nearly the same amount of coins mined). Energy efficiency is further increased by incorporating block rewards via Proof-of-Control, and not Proof-of-Stake or Proof-of-Work mechanism. Additionally, Kowala maintains two APIs to counter exchange API malfunction and hijacking.
Way forward for ‘crypto-consolidation’ that helps it score over volatile-cryptos
Unanimity among crypto generators can go a long way into substantiating cryptocurrencies’ advantage over traditional fiat and electronic transactions. Mere speculation and hubris aren’t going to be of much help, as was echoed by Eiland Glover (the CEO of Kowala crypto)-“Even with more media coverage of crypto innovations and events, we may be past the days when an ebullient mood among a few crypto insiders translates immediately into a price bump in the larger market”. This points towards the increasing understanding and acceptance of cryptocurrency amongst the masses, and that they aren’t speculating merely going by a ‘Consensus Conference’. Lack of volatility should encourage first time investors to go for stable cryptocurrencies.
Interoperability (like ERC-20) is something that traditional payment mechanisms lack. Cryptos’ smart contracts can help people invest in crypto-stock markets and at the same time ensure that their parked funds don’t become illiquid. They can liquidate their invested funds (against a negligible premium fees) and use it for securing their child’s education, paying mortgages, buying a car, etc. Not allowing the child entry into school via biometric entrance, cutting electricity connections and cryptographically locking the car’s ignition system respectively would be the sanctions against defaulting on those liquidations.
The future of 4th industrial revolution
Increasing technological advancements, big data and advancements in cognitive abilities of AI systems would enhance the dominance of cryptos because IoT and blockchain implemented smart contracts can go a long way in increasing the economies of scale and customer satisfaction. For e.g., usage of on-deck screen can be used to cryptographically lock the seat most chosen by a passenger (on flight, train or bus).
Loan defaulters can be put on no-flyers list by blacklisting their crypto-IDs. Rewards for community services can be monetised by issuing crypto-coins against their respective crypto-IDs. A person defaulting on his water bills can pay back by community service or by mining new coins. Blockchain technology can be effectively used to establish the line of ownership of vehicles. The vehicles’ crypto-IDs would do away with the need of number plates. Car companies would be able to better monitor the fuel consumption patterns, stress cycles endured by shock absorbers, propensity of airbag failure, emission statistics, etc. in different geographical and climatic conditions, and alert the car user against any unforeseen situation. They can use the information for improving their products and credit the vehicle owner with requisite crypto-coins for allowing information sharing.
Universal crypto standards would help to standardise inter and intra trade activities by doing away with the need of paper works, administrative backlogs, exchange rate variations, volatile price fluctuations, cross border trading problem due to varying PPP standards of people, formalised banking procedures for obtaining credit and for transactions, and most importantly- by removing the time zone barriers, it would ensure round the clock trading to ensure that people don’t miss on booking their profits when they note some important events on a ‘weekend’ (something not seen in time-bound stock exchanges). All this need a simple wand and a simple spell- crypto-ID and cryptocurrency respectively!
Let’s take an example to see how volatile cryptos can spoil someone’s investment spree, even if they promise huge but small time gains
Mining of a volatile crypto named ABC reduces the block reward with time, increases the mining difficulty and causes its price to tumble. The miners having lesser incentive to mine ABC, shift to another volatile crypto named XYZ and use XYZ to buy ABC (at reduced margins but still at a profit). Now, XYZ’s mining difficulty increases with time and ultimately it also falls in value. This domino effect is what has caused combined decrease/increase in the values of cryptocurrencies.
Kowala ensures against this crypto-volatility by incorporating a block reward cap. Kowala incorporates a ‘stability fees’ mechanism whereby a stability fees (in addition to mining fees) is charged to bring kUSD’s price back to $1, if capping of block reward is not enough to reduce kUSD’s supply in market (reducing the supply is required to increase kUSD’s price back to normal, i.e., $1). Also, the fact that kUSD would ultimately return to its original value help arbitrageurs to indulge in profit booking. This not only helps to fasten kUSD’s return to normal pegging but conversely increases the crypto supply in market (when arbitrageurs start booking their profits). This increase in crypto supply prevents indefinite increase of its value beyond $1.
Cryptocurrencies as form of investment
The fiat currencies aren’t backed by any commodities except for the trust that domestic and foreign nationals have on a particular currency; hence, fiat currency has had been subjected to volatility due to political turmoils, and with the world heading towards stringent protective policies after 2008’s meltdown, stable cryptos are the way forward. They are not subjected to forex variabilities, interest rate vulnerabilities and cross-border transaction levies seen in fiat money.
Even though stable cryptos don’t promise gargantuan returns, they aren’t subject to volatility, unlike Bitcoin which plummeted from around $19000 to around $7000 in less than 2 months. So, while volatile coins mirror small cap stocks in crypto-market, stable cryptos are equivalent to government bonds and T-bills. Investing in stable cryptos would ensure hedging one’s losses due to investment in volatile coins.
Hence, while a person should invest 3-5% of his/her assets in cryptos, they should park around 50% of those funds in stable cryptocurrencies like Kowala (whose value is pegged against standard stable currencies like USD, Euro, Yen, etc.). For someone who wants to avoid indulging in daily follows ups on cryptos, should go for a long term investment plan because long term plans can help to considerably offset the short term price volatility. Ideally, one should invest 50% of the capital in low-risk stable cryptos like Kowala, 30% in medium risk and super high cap cryptos like Ethereum, 15% in high risk ALT-setups (like XEM) and should reserve the remaining 5% for gambling in small cap but highly profitable ALT-cryptos (like ZEC).
For variability, people can opt 5-10% for investing in ICOs (like H20) and cloud mining contracts. For people who are still unhinged over investing in cryptocurrencies should wait until cryptos gain considerably more ground. Kowala is working on this front by initiating formalisation on various fronts like- publishing two exchange APIs to protect against hijacking of APIs, publishing kUSD market activity like price history, trading volume, block rewards, etc.
For ensuring cryptos’ safety, people can buy hardware wallets to store cryptos offline, away from the danger of being hijacked. People can also opt for cold storage (paper wallets) where private keys are printed on a piece of paper. However, it’s inconvenient to create and print a new wallet each time one sends funds to cold storage.
Kowala has introduced a ‘dead-end address’ mechanism. It is a wallet address that is precluded from having any outgoing transactions and it’s balance can’t decrease, but only increase.
To learn more about the unique technology behind Kowala’s next generation Blockchain, please visit:
– Blockchain and Cryptocurrency news: http://CryptoCity.tech
– Kowala’s Stablecoin Community: Kowala Community
Disclaimer: The written article is for a general knowledge and entertainment only. This is not a financial advice or any other professional advice of any kind. Anything you may choose to do or not to do based on the written above is at your very own responsibility .
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