Introduction
From personal experience, I am convinced that stablecoins hold the potential to transform Nigeria’s financial landscape. Yet, the question remains: Will it be able to successfully navigate the intricate terrain and overcome the unique challenges of Nigeria's policies? Do you think you know how this could all play out? Indulge me to pick your mind on this. First let us explore the unknown. You will carefully agree with me that;
All our knowledge begins with the senses, proceeds then to the understanding, and ends with reason. There is nothing higher than reason.
- Immanuel Kant
If I am correct we just agreed on something. Now let's proceed to knowing more about stablecoins:
In its most simplest form; a stablecoin is a digital asset that remains stable in value, hence the name stable. They are a type of cryptocurrency whose value is pegged/tied to another asset with a steady value. The difference, however, between a stablecoin and Bitcoin or Ethereum is that its value is pegged against an external traditional asset class (e.g gold, fiat money).
Think of it like a digital version of the naira banknote. Just as a ₦1000 bill represents a promise that you have ₦1000 worth of value, a stablecoin represents a similar promise, but in digital form. This makes them useful for things like online transactions, where people want the convenience of digital currency without the risk of the value suddenly going up or down.
You must understand that holding stablecoins does not present any form of interest to your portfolio, unlike holding other tokens.
Stablecoins act as a bridge between cryptocurrency and fiat-currency. Moreover, stablecoins are increasingly being accepted as a means of cross-border payments. Their ability to retain value and be transferred quickly and efficiently makes them an attractive option for international transactions. Holding Bitcoin and Ethereum are too volatile for daily use which may expose you to the risk of losing a chunk of your investment.
Let me throw more light on this; looking at Bitcoin since its inception, there has seen significant highs and lows. On 14th March 2024 it rose to a new All-Time-High (ATH) of $73,580.86, however, today (15th May 2024) it is at $62,125.74. In the case of stablecoins (e.g Tether USD ~ USDT) on 14th March 2024 it was at $1, however, on the 15th of May it's at $0.999108.