Hi! In this post, we will tell you about stablecoin and the ways it can help entrepreneurs.

The ubiquitous problem for entrepreneurs is capital. First, there’s the constant struggle of seeking to get access to enough capital to get an idea off the ground. Next, there’s the massively troubling problem of managing capital once the business takes off. Then, capital reinvestment and further acquisition for greater growth become challenges.

However, a new solution may be on the horizon: stablecoins. Blockchain technology has created these digital coins, and they may simplify the above difficulties dramatically.

What are stablecoins, exactly?

A new type of tokens, stablecoins may pose a solution to the volatility problem. A stablecoin is a cryptocurrency that uses blockchain technology for transactions but is also backed by fiat currencies (currencies like dollars, euros or yen) or else by commodities (akin to the gold standard, but using digital tokens). By combining these features, stablecoins provide the benefits of both cryptocurrencies and traditional currencies.

Thanks to these coins’ internal backing, users can streamline payments and acquire capital through transparent peer-to-peer (P2P) transfers ensuring liquidity, stability, and security. Think of a way to receive and immediately use investment funds without the burdens of bank transfers, time-consuming disclosure statements, and third-party fees. Transfers would be seamless and immediate, but still, contain all the safeguards of current systems.

By combining flexibility with a value floor, stablecoins offer entrepreneurs a new, and perhaps far more useful, method for acquiring, managing and investing capital. Payments and capital management could be handled digitally, and investment and fund control could all be managed with confidence based on the stability of the backing currency or asset.

What are stablecoins backed by?

Given their level of market potential, stablecoins have been on the rise. At this point, stablecoins backed by U.S. dollars (USD) are dominating this sector. These dollar-backed stablecoins include Tether’s USDT, Circle’s USDC, Paxos’s Standard Token and TUSD, all listed as top cryptocurrencies by their market capitalization. These tokens have reached this heady place because of their rapid adoption by businesses and consumers alike.

However, some firms are seeking to break the stereotypes and develop still newer forms of stablecoins that incorporate even more features. One good example is PlasmaPay, a European startup developing a blockchain-powered payment platform and ecosystem that revolves around the Plasma cryptocurrency. The advantage of the Plasma cryptocurrency over U.S. dollar-backed stablecoins is that it can remove the volatility risks of both cryptocurrencies and fiat money. Thus, if the value of the U.S. dollar dropped significantly, the corresponding value of a U.S. dollar-backed stablecoin would drop, as well. Essentially, the platform would be hedging against any loss by calling on the global group of currencies to mitigate the loss risk for its users.

Can stablecoins help your business?

With their combination of flexibility and stability, and their enviable ability to back their coins with various world currencies, stablecoins may be the best way for entrepreneurs and startup managers to pursue a capital acquisition. Here are some ways stablecoins could be used to help your business grow:

Flexibility — The digital aspect of stablecoins allows you to manage funds rapidly and without international barriers. There is no third-party intermediary required to check, process and verify payments and transfers.

Specifically, businesses are able to send and receive international transfers almost instantly, provide payments to contractors both locally and overseas with ease and save a substantial amount of money on inter-bank transfer fees.

Stability — the backing of stablecoins allows entrepreneurs to have confidence that the investments they receive will maintain their value.

Investments received in other flexible digital tokens like Bitcoin, while helpful, are subject to substantial market swings. Stablecoins provide market stability, protecting your working capital and savings from major fluctuations. In a nutshell, your investment won’t lose value with inflation changes.

Capital acquisition — Investors and lenders can use these tools to move money into a startup, and entrepreneurs can likewise move funds back to investors, all without the tedium of legacy banking systems.

This feature allows for capital acquisition to take place globally, rather than simply locally, providing far more potential for growth. By eliminating the headaches of international transfer and investment obligations, stablecoins have the power to link you with investors in a genuinely peer-to-peer relationship.

Conventional currencies have a history of violations of confidence that they would not be depreciated. Banks must be trusted to keep our money and transfer it electronically, but they lend it in waves of credit bubbles with only a fraction of the reserve.