Why Stablecoin is an important factor in DeFi?
We all know that currently, Stablecoin is being the most exciting term of the cryptocurrency globe. Even though Blockchain possesses decentralization, immutability, security, and a lot more, lots and lots of cryptocurrencies suffer from volatility to a greater extent. This makes a harder environment for the adoption of cryptocurrencies. Stablecoins are one which has the tendency to pair all the tenets of blockchain with stability and familiarity of traditional fiat currencies. Thus stablecoins create an easily accessible and exciting new financial environment named Decentralized Finance.(DeFi)
Importance of Stablecoins in DeFi
The value of stablecoin may come from many different places, which depends on what stablecoin you are describing. As of now, there are over 200+ stablecoins created on the Ethereum blockchain alone.
Some of the famous stablecoins are USTD, TUSD, DAI, USDC, and more. These stablecoins are pegged to $1 USD with different governance protocols, degree of decentralization, features, and more.
Since DeFi Projects on Ethereum blockchain integrate various digital assets, Maker protocol's DAI stable coin has become the most used stablecoin in the DeFi space.
Why is DAI the most used Stablecoin in DeFi?
Maker's DAI is the famous stablecoin in the financial service sector, as it provides stability and liquidity in a greater extern which other stablecoins cannot provide their users.DAI is a decentralized soft pegged, transparent stablecoin backed by a surplus of collateral.
The advantages of DAI such as security, transparency, liquidity, stability, and trust have given the DeFi community ultra-level confidence in both stablecoin and Maker protocols.
In the crypto globe, there are many dapps that integrates the DAI and features of Maker protocols in other dapps which makes the ecosystem more valuable. This high utility of DAI has resulted in the mass adoption of DAI around the world which triggers developers to build more new financial DeFi products or DeFi dapps that allow users to use DAI, earn DAI, accept DAI, and more.
Liquidity is nothing but the degree to which an asset can be turned to cash or fiat currency. When it comes to DeFi, the term liquidity is the most necessary aspect to build successful DeFi projects.Project with low liquidity fails in user adoption.
Thus, liquidity pools creates trust among users and this shared liquidity in turn increases trade volume and also attracts more users.
Permissibility can be provided only when the system has unbiased access,stable units of account such as DAI. Thus, DAI has gained greater market share over years in DeFi dapps and it will continue to share liquidity and always be the most adopted stablecoin in the DeFi space.
Some other famous stablecoins that are most used in DeFi space are as follows
- Tether (USDT)
- USD Coin (USDC)
- Reserve (RSV)
- True USD (TUSD)
- Libra coin and more.
Thus stablecoins are the most important factor in DeFi that performs a vital role in decentralized finance space.
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