This year has seen some major technological advancements within the crypto market. One of the areas that have seen considerable expansion is the stablecoin market. There are now more stablecoins available to the public than ever. These projects span the range of assets from fiat-pegged tokens like USDT to coins that derive value from diamonds and even other cryptocurrencies.
Ever since Satoshi Nakamoto changed the world through the introduction of Bitcoin, developers have sought out ways to provide the same level of convenience without the volatility. This desire has led the market to a variety of different types of stablecoin concepts. Each of these types of stablecoins has its advantages and disadvantages.
Fiat Pegged Stable Coins
By far the most popular type of stablecoin in use today is the fiat-pegged stablecoin. These tokens provide a valuable service to traders as a way to escape crypto volatility. They are ideally suited for this task because they are integrated into most major CEXs (centralized exchanges) and are far more efficient than converting crypto directly into fiat currency and then back again.
The upside of fiat-pegged stablecoins is obvious. It’s much easier to track and monitor their value since they are denominated in fiat. This scenario means that fiat-pegged stable coins are easier for accounting purposes as well. Companies have no problem showing any crypto expenses when using fiat-pegged stablecoins.
The problem with fiat-pegged stablecoins is that they can’t escape bad monetary policies and inflation. These digital assets can see their value reduced by overprinting and other man-made problems. They’re tied to the same downfalls as fiat currency making them not ideal for long-term savers.
A fiat-pegged stablecoin is suffering from the same record-high inflation that is currently plaguing the market. In the US, inflation rates haven’t been this high since the early ’80s. Worst of all, analysts predict this trend to continue and rates to go higher with some stating with confidence that a recession is around the corner.
Inflation is a major problem for savers because it robs them of their future purchasing power. Inflation is a loss of buying power in an asset. Notably, cryptocurrencies like Bitcoin are a perfect example of how blockchain technologies provide traders with better alternatives in terms of store-of-value characteristics than fiat currency. Bitcoin has outperformed fiat currency in value growth consistently every year it has existed.
Crypto backed Coins
Another style of stablecoin that has gained popularity is crypto-backed projects. These platforms are unique because they use other cryptocurrencies and algorithms to attempt to remain stable. For example, a crypto-backed stablecoin would use a reserve of ETH or another major coin.
This system is set up to reduce or increase the reserves to ensure the token remains stable. There are also versions of this style of stablecoins that change the circulating supply to reduce or increase value. The most common form of this style of stablecoin will burn tokens to remove them from circulation forever.
Unlike fiat-backed projects, which require users to take the firm’s reserve values based on trust, crypto-backed stablecoins are more transparent. Their main draw and advantage is all the transactions are on-chain. This setup makes it easy to check the reserves and state of the network in real-time using a free blockchain explorer. As such, there crypto backed stable coins have been around since the early years of crypto adoption.
Sudden Value Losses
One of the biggest issues faced with crypto-backed stablecoins is sudden value losses. The thing about backing your stablecoin with other cryptos is that all of these assets are volatile. As such, it’s possible for all of these assets to lose a lot of value at the same time. When this scenario occurs, it’s nearly impossible to retain the value of the project.
In the LUNA/UST crash in 2022, this is the exact scenario that played out. UST was backed by LUNA tokens. When it came to light that UST was struggling to remain pegged to the dollar, traders began selling their LUNA tokens in mass.
Whales are Dangerous in this Scenario
Eventually, a whale trader joined in on the spree and liquidated 5% of the total LUNA circulating supply. A whale is a large trader that holds enough tokens to influence the price of the asset based on their movements. Whales are particular harmful to new traders as they can manipulate prices and conduct schemes like pump and dumps.
This maneuver tanked the value of LUNA and UST. It also made it impossible for UST to regain its value as its reserves lost 94% of its value overnight. Sadly, this scenario has played out in the crypto history books many times. It’s also the main reason that algorithmic stablecoins are seen as the least stable.
Eventually, developers wanted to gain stability through the use of commodity reserves. Unlike fiat currency, commodities enjoy separation from the government. Assets like gold have long served as global reserve currencies and are agnostic. This scenario led to a variety of commodity-backed projects.
There are commodity coins that are pegged to oil, diamonds, gold, and much more. These tokens are more stable than fiat-backed projects and in many cases they enjoy appreciation. Gold remains a go-to asset during market volatility. As such, when the market gets volatile gold sees a rise in demand.
This rise in demand provides a bump in value. This bump directly correlates to more value in gold-backed tokens. Consequently, most traders prefer gold-backed tokens for long-term saving strategies. However, there are some downsides to consider.
All Eggs in One Basket
The main downside of commodity-backed projects is that they have all of their value in one asset. For example, an oil-backed token could see a major loss in value if production kicks up or alternative methods of fueling vehicles emerges. This sudden loss in value would hurt an oil-backed token considerably.
Basket of Assets
The best stablecoins will leverage a basket of assets. A diversified reserve will ensure that if one area of the reserves losses value, the token will not completely tank. There are projects like META 1 Coin that leverage this concept to the fullest through the use of a basket of gold-related asset reserves.
Why the Market Needed Safe Haven Coins
The problem with early cryptocurrencies like Bitcoin is that they were built at a time when there were different concerns in the market. Bitcoin was built to provide a secure way to transfer value in a peer-to-peer manner. Today’s advanced blockchains need to do much more than just transfer value. They need to offer programmability, security, and most importantly, scalability.
What Are Safe Haven Coins?
Safe Haven coins combine the stability of stable coins with value control mechanisms. These systems can vary in their method but most work by locking in the asset value or burning tokens collected as fees. A perfect example of a safehaven asset in operation is the META 1 stablecoin.
META 1 is pegged to a basket of self-appreciating gold-related assets. Since it’s not pegged to one specific asset type, it’s more resilient to market fluctuations in its pegged asset. Also, since gold appreciates over time, the META 1 token is among the first self-appreciating safehaven tokens to gain popularity.
Smart Contracts to Protect Value
The META 1 coin integrates a value control smart contract. This mechanism leverages off-chain sensors called oracles to monitor the asset value of META 1 coins across multiple exchanges. This data is then used to determine the accurate asset value of the token.
This is the lowest that any trader can sell their META 1 coins at. This strategy prevents large-scale sell-offs from tanking the price of the token. By removing the risk of an a sudden dump, META 1 Coin holders gain another level of confidence in the project. All META 1 coin value changes will be gradual so traders can sleep at night.
Another major concern for haven token designers is decentralization. If a blockchain becomes centralized, it loses its ability to remain secure. Even Bitcoin can fall victim to a 51% attack if more than half the network nodes go corrupt. Recognizing that centralization causes multiple problems within a DeFi network, the META 1 development team created a special-purpose smart contract.
Smart contract 6 requires all traders to confirm they are human beings and not a corporation or large trading firms. This service also prevents governments and other large trading groups from attempting to usurp the community. Preserving decentralization is essential for the future of DeFi projects. META 1 has figured out a way to protect its network autonomously.
$5M Token Limit
Any trader can become a whale and companies can disguise their identity to infiltrate networks. Understanding these risks, the developers decided it was smart to place a $5M token limit on individual users. This limit was put in place following the massive losses that UST and LUNA traders took due to the whale sell-off.
META 1 Coin is the first DeFi network to introduce a token limit. This limit demonstrates the developers goal to create a more transparent and fair digital asset. The community is to remain decentralized thanks to these vital measures. Long-term decentralization is a crucial component of the safety and longevity of the network. As such, protecting it makes perfect sense.
Extra Features to Mention
There are a lot of other features that META 1 token holders gain access to when they join the network. For one, joining is easy. You can convert +50 fiat currencies to META 1 tokens directly using the Onramper protocol. This feature streamlines DEX usage and helps to drive crypto adoption.
Traders benefit when they utilize the META Exchange. This high-performance network connects traders in a secure and streamlined manner. The protocol operates on the META Blockchain which provides it with unmatched scalability. Company bench tests show the DEX‘s transaction throughput on par with the NASDAQ and other reputable global exchanges.
The META Exchange is non-custodial which means that you can trade your assets directly from your wallet. Non-custodial exchanges are better for traders because they never have to worry about their crypto being stolen by exchange hackers or not being able to access their funds due to upgrades and network outages.
The METANOMICS DeFi ecosystem provides users with an easy way to generate wealth. The entire system was built to create low-risk wealth-generation opportunities for users. There are no gatekeepers or centralized groups to censor or block your membership. Anyone can join and start securing low-risk rewards.
The network supports staking and savings account features. Both of these options are ideal for new users because you can secure rewards without giving up ownership of your crypto. Best of all, your rewards are paid out in META 1 coins that can be added to your original stake to increase future profits.
Anyone can enjoy 10% APY on their savings when they use the META VAULT savings account. The feature is simple and open to anyone. Notably, the META VAULT integrates top security protections including 2FA.
META 1 Debit Mastercard
Life would be much easier for crypto traders if they didn’t need to convert their rewards to spend them. This is the concept behind the next-gen Meta 1 Coin MasterCard Debit. This card remains connected to your META VAULT account. It enables you to spend your crypto at any vendor that accepts MasterCard.
All you need to do is swipe the card and the system does the rest. It will automatically convert your META 1 Coins into a corresponding value in fiat currency. The process takes seconds and is indistinguishable from a regular MasterCard transaction. The vendor receives fiat and you can spend your passive rewards with ease.
Safe-Haven Coins are Here to Stay
You can expect to see some copycat protocols in the coming months as META 1 token users continue to see growing ROIs. The combination of anti-inflationary systems and decentralization protection mechanisms makes META 1 an ideal example of how developers are getting more innovative in their concepts and approaches.