The cryptocurrency ecosystem is witnessing tremendous mention in recent times, as global economies explore new ways to navigate the murky waters of a world immersed in a pandemic. In the not too distant past, people mentioned cryptos only when they were speculating, with the idea of profiting from their engagement. But recently, the concept of tokenisation is receiving more audience.
Tokenisation is a process where actual physical assets back a token. This process is akin to how the gold standard of currencies was maintained, where an individual who owns a dollar note, can access the gold equivalent of that note in their possession. With this kind of structure, the central bank could not print new notes, except it had that quantity of gold in possession. However, as governments needed more money to expand the economy, the shift from gold back currencies to fiat system started taking place.
Tokenisation and Crypto Adoption
The fiat system of money has been around for a while, and it has its benefits when adequately managed. But this has not always been the case, and it has caused several people to start losing faith in the fiat system. Coupled with the issue of the present pandemic, that has sent shock waves to the global economy, the rise in the demand for stablecoin is worth noting.
Stablecoins offer a right balance for people who want access to currencies that are not subject to much speculation and fluctuations, like bitcoins and ethereum. Stablecoins are backed to assets like treasury bills/certificates, cash, and gold. For example, the USDT(tether) and USDC(USD Coin) are backed by actual dollar reserves. Because of the assurance behind this framework, a lot of multinationals and institutions are procuring them en masse lately.
In addition to the ease of assessing these stablecoins, compared to real dollars/euro, stablecoins removes the problem of the reserve requirement. Institutions can quickly transfer payments to suppliers without paying several layers of fees imposed by regulators and financial institutions.
Also, the pandemic has made more people to start looking at means of conducting business in digital forms. There has also been a spike in the quest of blockchain solutions, with government bodies calling for increased participation of private sector developers and entrepreneurs.
Source: cointelegraph
