0
⭐ Features
116 views

Three Major Problems Stablecoins Can Impose on Market

  • Yuri Molchan
    ⭐ Features

    It is not all so cheerful about fixed-price crypto coins


Three Major Problems Stablecoins Can Impose on Market
Contents

As of late, the Coinbase announced the listing of USDC (USD Coin) emitted by the Circle startup. Many more similar asset-pegged tokens are emerging. The most popular projects so far, such as TrueUSD (TUSD) and Gemini Dollar (GUSD), are gradually minting more coins and broadening their reach. Meanwhile, the former leader Tether (USDT) is being promptly taken out of the market.

Below are the major troubles that stablecoins may cause for their investors.

Centralized grip

Regardless of what coins are pegged to, they are emitted by one central entity. Everything about stablecoins has been planned in advance, even the code and market behavior. So, the emitter may decide to increase the supply, for one thing.

There is no limit to that, unlike with any other decentralized crypto, such as Bitcoin or Ether, where the supply is limited by the code to imitate money that cannot be harmed by inflation. With stablecoins, however, the supply can be endless.

👉MUST READ

Interest in Cryptocurrency Leaders Drops: New Players Likely on the Rise

Interest in Cryptocurrency Leaders Drops: New Players Likely on the Rise

Besides, an asset-pegged coin is also a financial instrument which can be used indirectly or deliberately to manipulate the market.

Control over holders’ accounts

When you deal with Bitcoin or Litecoin, for instance, nobody is able to seize your coins unless through a cyber attack. However, the protocols of some coins enable their makers to freeze wallets and the entire balances along the way.

Paxos Coin can do that, and so can USDC. Actually, all stablecoins based on the Ethereum ERC20 standard can be controlled. The same thing can happen with XRP, even though it is not a stablecoin.

This time centralized control can harm each user personally. At present, when any crypto can be considered dangerous and illegal or used for criminal purposes, this is certainly a real possibility to get your balance frozen.

👉MUST READ

New Coinbase’s Stablecoin (USDC) Watches Accounts, Can Freeze Tokens at Will

New Coinbase’s Stablecoin (USDC) Watches Accounts, Can Freeze Tokens at Will

Attacks against the USD peg

Some of the stablecoins are protected by nothing but their algorithm. This makes them vulnerable to what is similar to a Forex trading attack on a fiat currency. When experts in their craft attack the USD peg of a stablecoin, they can get a certain profit.

If we think of the current withdrawal of USDT from the market, that thing happened out of the blue despite whole months of skepticism before it. Anyway, there can be deliberate attacks against some stablecoins to bring on fluctuation to earn profits.

Numerous Forex experts believe that stablecoins are rather vulnerable to exchange rate attacks and these coins’ teams are not even aware of the fact.

👉MUST READ

Crypto Prices Can Be Predicted, Says Science

Crypto Prices Can Be Predicted, Says Science

Cover image via u.today
The fastest way to get crypto news is to follow our Twitter. You won’t miss a thing! Subscribe.

About the author

Yuri is a journalist interested in technology and technical innovations. He has been in crypto since 2017. Believes that blockchain and cryptocurrencies have a potential to transform the world in the future. ‘Hodls’ cryptocurrencies. Has written for several crypto media. Currently is a news writer at U.Today.

👓 Recommended articles

This site uses cookies for different purposes. Please set your preferences in Cookie Settings and visit our Cookie policy for more information on how and why cookies are used on this site. Click here for cookie policy

Cookie settings