The stablecoin, a digital currency pegged to a stable asset, has been forecast to be the blockchain star of 2019. Mitigating the volatility that usually plagues the crypto world, stablecoins are bringing much needed stability back to the blockchain trading platform. Australia and Japan are among the latest countries to introduce their own state backed stablecoins,1 highlighting the surging popularity of stablecoins around the world. With blockchain entering its second decade, the next evolution is set to see blockchain backed by digitised precious metals like gold and silver, bringing added stability to the decentralised ledger system.
The solution to addressing previous blockchain instability lies in the digitisation of gold, a trend that is growing in popularity especially in the Middle East, Canada and Australia –causing the value of gold to climb exponentially.2
Stablecoins have been heralded as the solution to bringing mainstream, institutional investors to the blockchain platform, leveraging their backing to traditional currencies to increase their investment appeal. However, tethering stablecoins to traditional fiat currencies hasn’t been without their own challenges. Recent political turmoil has seen the headlines being bombarded with fiat currencies suffering major price fluctuations this year, casting a dark shadow over the security of tethering a cryptocurrency to a centralised fiat currency. As such, stablecoins backed by physical assets are invariably more sound and perceived to hold the greatest level of value.
Thomas Coughlin, CEO of Kinesis, the bullion-backed blockchain monetary system, comments:
“The Kinesis monetary system was introduced to hedge against this particular deficiency. Backed to digitised physical commodities, namely gold and silver, the inherent stability of these commodities mean the Kinesis monetary system is less vulnerable to value fluctuations. With market volatility only expected to increase in the coming year, the investment attractiveness of fiat-backed stablecoins is fast diminishing. As the industry evolves, innovations such as the stablecoin as well as the increase in international regulations will be the catalysts to bringing this previously fringe investment into the mainstream. The solution to creating a sound digital currency lies in combining the age-old security of gold with the technical advances of trading on the blockchain.”