Daniel Popa on Achieving Stability in Crypto Markets
Blockchain Beach, a prominent independent media organization which publishes trusted news about blockchain technology and decentralized culture, featured an opinion piece written by Anchor’s CEO, Daniel Popa. In the article, he discusses the issues facing fiat markets which cryptocurrencies were intended to solve. Popa highlights how the fall of just one nation can have a devastating global effect, listing several historical and modern examples which have shaken nations worldwide.
The biggest problem is the fact that no truly stable value exists. Although many have pegged their currencies to the USD, it depreciates over time. Popa reminds us that cryptocurrencies appeared as one of the most radical attempts to provide stability, but despite the growing number of different cryptocurrencies, they remain highly volatile. Considering, investors refrain from placing their capital in anything that is dependant upon short-term predictions and prone to daily fluctuations.
Popa then moves on to explain how stablecoins were developed to offer long-term price stability, achieved through ties to more predictable assets and algorithms. At this point, there are three types of stablecoins:
- Fiat-collateralized, backed by fiat currency (most commonly USD)
- Crypto-collateralized, backed by other cryptocurrencies (e.g. Bitcoin or Ethereum)
- Non-collateralized, which value derives from mathematical formulas and other mechanisms.
Unfortunately, none of the three manages to deliver much-needed stability. The first two lack a stable fiat currency or cryptocurrency they can be pegged to, and the third one is, in most cases, too complicated to achieve and explain, even to some of the most reputable experts in the blockchain industry.
Despite the current state of affairs, Popa finishes on a high note. He believes that even though the existing stablecoins have failed to achieve the stability we are in dire need of, new solutions are on the horizon. He indicates that we are aware of the problems the current system is facing and mentions that Anchor is working on a solution that is on the right track to finally deliver stability, predictability, and ease of understanding.
But this is just the gist – read the entire article on Blockchain Beach.
Title photo by TierneyMJ, Shutterstock.