Stablecoins, more than just taking profits

Good morning/evening
 
Well there is a lot of chatter about Stablecoins at the moment. We have no doubt all used Stablecoins at some point, even if it is just to buy crypto or convert some profits to stablecoins. But what are the different types of stablecoins and what else can we do with them? Also why the great fuss about stablecoins now? Well, the Genius act has just been passed and stablecoins now have clearer regulation, they must be fully backed, regularly audited and transparent. Although regulation can be a bad word in crypto, it does mean that opportunities are opening up for stablecoins, such as

• Walmart paying suppliers in stablecoins.
• Cross-border payrolls using USDC instead of wire transfers.
• Savings apps offering 6% yield on your digital dollars.

 
Stablecoins are designed to hold a stable value and they are usually pegged 1:1 with the US dollar, they are not supposed to swing wildly but there have been occasions when a stablecoin has de pegged.
Some of the most widely used fiat backed stablecoins are

• USDT (Tether)
• USDC (Circle)
• DAI (MakerDAO)
• TUSD, BUSD 

 
For every one USDT there is $1 in a bank or equivalent and this should be audited regularly but these are centralized and have also been subject to account freezes (sounds like a bank, the sort of thing we are trying to avoid!) As well as blacklists, but there is now more and more mainstream adoption of these stablecoins
Then there are algorithmic stablecoins
These are not backed by fiat. Instead, they use smart contracts and economic incentives (like minting/burning tokens or adjusting interest rates) to keep the price stable with an an algorithm, if the price goes over $1 they can mint more supply and if the price drops the contract can burn supply, but collateral can also be liquidated to maintain a peg. Although in my opinion these can be more risky they are decentralized and censorship resistant. BUT we all remember Terra eh!
 

• DAI (MakerDAO) backed by crypto, semi-algorithmic
• Frax (FRAX) partially collateralized, partially algorithmic
• Ampleforth This one used to be a Pub0x tipping token

 
So what can we do with our stables other than just cashing out to fiat? I had some stablecoins on Aave earning a little, but there are other ways.
Lend your stables and earn yield, although as always there is risk involved.
Liquidity pools on DeFi protocols like Kamino can offer good rates.
Arbitrage in countries where there is hyperinflation currency exchanges (buy USD stablecoins low, sell high locally)
Staking and governance, some algorithmic or decentralized stablecoins (like DAI or FRAX) allow you to stake governance tokens and earn yield or vote on protocol upgrades. 
 
As with all things crypto the risks are very real and some depegs have been catastrophic, some have been temporary bips
 

Then we have the unbanked so when I think of stablecoins, it is about avoiding volatility or locking in some profits, but outside of the Web3 echo chamber, stablecoins are changing lives in places where people don't even have a bank account.
There are apparently 1.4 billion unbanked people globally, according to the World Bank. That means no access to savings accounts, credit, or even basic transfers. But while banks have failed to reach these people, smartphones haven't and that’s where stablecoins come in as all it takes is a phone and a wallet app
 
Now suddenly

• A worker in Lebanon can get paid in USDT instead of plummeting Fiat.
• A Venezuelan business can hold USDC to avoid hyperinflation.
• A Nigerian freelancer can accept stablecoins instead of battling banking red tape or PayPal restrictions

Stablecoins can be survival for countries with hyperinflation plus you can access them 24 hours a day, not just when your bank is open.....If you even have a local bank. But there can still be problems.
 
 

• Internet access and smartphone literacy are still barriers.
• Stablecoin off-ramps (converting to cash) can be limited or expensive.
• Trust issues remain: What if USDT depegs? What if the issuer is sanctioned?

 
While most stablecoins are pegged to the dollar and even the Euro there are also gold backed stablecoins, this is something I have not considered before but may take a look at

GOLD
 

 
Gold-backed stablecoins aim to combine:

• The stability and legacy of gold
• The speed and accessibility of crypto

Each token is typically backed 1:1 by a specific weight of gold, stored in a secure vault. For example:
Token Backed By Storage Notable Features PAXG 1 fine troy ounce London vaults Redeemable for real gold XAUT 1 troy ounce Swiss vaults From Tether’s issuer DGX 1 gram Singapore vaults Transparent audits 
 

• Inflation hedge: Unlike fiat-pegged stablecoins, these actually gain in fiat value when gold rises.
• Escape from dollar hegemony: Some users don’t want to be tied to U.S. monetary policy.
• Censorship resistance: If governments crack down on USD stablecoins, gold-backed coins might be harder to police (though not immune).

• Not DeFi-native
• Lower liquidity
• Centralized custody. The gold is in vaults, controlled by companies. If those companies fail or get sanctioned, so does your coin.

As economic uncertainty grows and trust in fiat erodes (even in developed countries), gold-backed stablecoins could be something worth looking at. digital gold V digital dollar may be something for me to consider. What are your thoughts on stablecoins? Do you have any of the gold backed stables?
 
As always thank you for reading and please feel free to comment and share your thoughts.