Stablecoins: Web3 Digital Dollar

If Bitcoin (BTC) is digital gold and Ethereum (ETH) is a global computer, then stablecoins are the electricity that keeps the entire Web3 ecosystem moving. Since the inception of stablecoins, it has become the primary bridge between the volatile world of crypto and the practical needs of global commerce.

Stablecoins like USD Coin (USDC) or Tether (USDT) are digital assets designed to maintain a 1:1 peg with a stable reserve, most commonly the US Dollar or gold. By combining the stability of fiat money with the 24/7 speed of blockchain, stablecoins are doing an excellent job in solving the volatility problem that once prevented crypto from being used for daily and practical purposes. Just a few use cases for stablecoins are:

1. E-Commerce:
   Using stablecoins protects the data privacy of the buyer and ensures a consistent value for goods and services ensuring both parties gets a fair value from the transaction.
2. Remittances:
   Compared to traditional banking systems for cross border transactions, Web3 users can utilize stablecoins to transfer value to another party at a fraction of the cost imposed by banks or other conventional intermediaries. Stablecoins enable global transfers with minimal fees and time.
3. International Business:
   Businesses that operate across international borders need to navigate multiple currencies to finalize transactions. By using stablecoins, the businesses can offer an option that will streamline operations around a single and stable digital currency, henceforth making the businesses more cost-effective.

The growth of stablecoins in the last few years has been exciting as well as surprising:

1. Market Dominance:
   Based on Ethereum blockchain data, USDC’s share of on-chain transaction volumes has consistently remained above 40%, since January 2022. In fact, USDC’s on-chain popularity has only increased steadily since, and now hovers at more than 70%. (source: CoinGecko)
2. Mainstream Rails:
   Financial giants like Visa has integrated stablecoins (primarily USDC) into their core payout networks, allowing money to move at the speed of an email.
3. A Lifeline for Economic Uncertainties:
   In emerging markets like Argentina, Nigeria, and Turkey, stablecoins are playing an increasingly role as a survival tool. Turkey for example is making significant purchases of stablecoins driven by high inflation and currency depreciation. (source: Chainanalysis)


How Stablecoin is Keeping Web3 Running

So, what are the key factors ensuring stablecoins remain the backbone of the decentralized Internet?

1. Instant Global Settlement:
   Traditional cross-border bank transfers can take 3 to 5 days and cost up to 7% in fees. Stablecoins on the other hand can settle in seconds for a fraction of a cent, making global business transactions a snap.
2. Programmable Money:
   Because stablecoins live on-chain, they can be coded. A DAO can set up an automated payroll that only releases stablecoins to contributors when certain milestones are verified by a smart contract.
3. The Foundation of DeFi:
   Without a stable unit of account, decentralized lending and borrowing would be impossible. Stablecoins therefore provide the "floor price" that allows users to take loans or earn interest without worrying their collateral will crash overnight.
4. Regulatory Maturity: 2025 was a turning point with the passage of the GENIUS Act in the US and the full implementation of MiCA in Europe. This regulatory green light has allowed traditional banks to finally hold and issue stablecoins, bringing trillions in institutional liquidity onto the blockchain.
5. A Universal On-Ramp:
   The stablecoin sector is playing an important role as a gateway for Web3. It is much easier for a business to understand "Digital Dollars" than an altcoin that wildly fluctuates in value. Once an individual or entity hold some stablecoins, they can begin right away to explore opportunities in DeFi, NFTs, and DAOs.



Web3 Onboarding You Can Try Now

1. Use your Web3 wallet's 'Buy' feature to obtain some stablecoin. If you don't have a wallet, you may try Metamask that is quite popular with beginners.
2. For beginners, Polygon (POL) or Base are often better choices than Ethereum Mainnet because the transaction fees are much lower. If your wallet does not contain ETH or POL tokens, you need to get some to cover the fees. You should be able to buy these tokens from your wallet too.
3. Click on the 'Buy' button and search for the stablecoin that you wish to buy e.g. USDC or USDT. Your wallet should automatically generate some quotes for you. Pick the one with the best rate or choose another one that you like.
4. Follow the on-screen instructions to confirm and complete your transaction. Bear in mind that the speed of Web3 may be slower than what you are used to with Web2 websites, so just be patient.

After you hold some stablecoin in your wallet, you may try the following:

• Payments & Spending:
  Use your stablecoin to buy goods and services online or in person. Merchants that accept crypto are however still very limited.
• Trading & Investing:
  If you want to buy Bitcoin (BTC) or Ethereum (ETH) but feel the price is too high today, you can "park" your funds in USDC or USDT. When the market dips, you can use the Swap feature in MetaMask to instantly trade your stablecoins for ETH or BTC.
• Earning Yield:
  You can earn interest by lending your stablecoin in DeFi (Decentralized Finance) protocols that enable users to lend and borrow cryptocurrencies in a trustless and permissionless manner. These protocols function like a Web3 native bank. For example, check out Aave or Compound.
• Low-Cost Remittance:
  If you need to send money to a friend or family member abroad, stablecoins are faster and cost a lot cheaper than remittance services offered by banks. You just need the recipient's wallet address and they can cash it out at a local exchange after they receive the funds.
• Exploring NFT Marketplaces:
  Many NFT platforms like OpenSea allows you to buy digital art or collectibles using stablecoin instead of the volatile ETH. In this way, you do not have to worry about the price swings of crypto.

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There is a growing need in Web3 to make decentralized technologies as "invisible" as possible to layman users so they will not be bogged down by technicalities. In fact, many Web3 users today probably don't even realize they are using a blockchain as they just need to know that their money moves faster, costs less and is always available. Stablecoins are thus the silent additive that blends into the Web3 engine, giving the industry a much needed boost.

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