2 PAYMENT METHOD PROFILES: STABLECOIN
in a developing country – e.g., Argentina where the Argentine Peso has been devalued over the past 10 years, from 8.95 per USD in May 2015 to 1195 per USD in May 2025 735 – can easily buy USDT with their local currency and hold it in a crypto wallet. If a merchant accepts Tether, the consumer will have the option to pay with USDT instead of the local currency and avoid international wire transfer fees which on average cost $44 per transfer. 736 The merchant has the option to hold stablecoins in their reserves or work with a third-party service provider to convert to their preferred currency before it reaches the merchant’s treasury. Refunds The immutability of transactions added to the blockchain ensures no transaction can be canceled or reversed. However, refunds are possible and depend on the merchant as well as the service provider. For example, a merchant accepting Crypto.com payments can refund money to a consumer in whichever payment method was used, whether it be in fiat or crypto. 737 Blockchain and Decentralization Cryptocurrencies utilize blockchain technology. Blockchain technology is a type of database management. It can be used to create a distributed, immutable ledger where the data is stored in blocks linked together in a chain. Operating on a blockchain allows data to be transparent and validated by various participants rather than hidden and controlled by a single authority which can be referred to as decentralization. Stablecoins existing on a blockchain present advantages including more security and transparency, increased accountability and traceability, and ease of cross-border transactions. Putting the Stable in Stablecoin As noted in the history above, most stablecoins are backed by reserves and often are pegged to the U.S. Dollar. However, this is only one type of stablecoin, namely off-chain collateralized; variations of stability mechanisms and collateral provide us with three different types of stablecoins all with the common goal to create parity to a stable asset. Types of Stablecoin 738
Types of Stablecoins
Description
Example
Algorithmic
Lacks collateral
Basis
Backed by another cryptocurrency
On-Chain Collateralized
DAI
Backed by fiat currency or other non-crypto asset
Off-Chain Collateralized
Tether ii
Table 2.22
ii
All stablecoins included in the Global Overview are off-chain collateralized.
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