Written by Adar Weinreb
2019 is proving to be a banner year for the EOS blockchain. There’s higher trading volume and increased DApp usage alike. Since September 2018, there have been 20-50 new DApps deployed to the mainnet every month. But the most momentous event signalling the platform’s maturation is probably the success of EOS-based stablecoins.
The previous year brought lots of popularity to stablecoins, and 2019 saw this market triple its share with a huge influx of new players. Considering the volatility of the traditional cryptocurrency market, the attention on stablecoins is quite understandable — they are a strong tool for hedging risk and maintaining asset value.
Why EOS needs stablecoins
Most cryptocurrencies like Bitcoin and Ether have declined in value in 2018, and EOS was no exception — it dropped almost 75%, from $20 in April 2018 to $5 in July 2018. Fluctuations have been less severe in 2019: between June and July, EOS lost 56% of its price.
But traders and speculators alike can make profits using some bear market strategies. The great advantage of stablecoins is that users can back them with collateral from their EOS holdings to guarantee price stability. According to CoinMarketCap, Tether’s USDT stablecoin daily trading volume surpassed Bitcoin’s in 2019. That means there is a huge demand for stablecoins in general (and EOS-backed stablecoins in particular) that will lead to increased demand for EOS. Besides, “locking” the price volatility in case of market downturn reduces the amount of liquid EOS tokens available on secondary markets, ensuring that the price doesn’t fall too quickly due to lack of short selling. It works perfectly in times of a bear market.
The second point of EOS’s mounting success is in its increased tradability, This refers to distribution not only through EOS-based decentralized exchanges, but also through centralized exchanges that let EOS holders trade there and exchange for fiat or fiat-pegged currencies.
The success of EOS-based stablecoins lies in three key things: growth in the number of people who hold stablecoins, different use cases beyond holding and trading, and market-making capabilities that the internal market has already demonstrated with opportunities on the RAM market and Bancor algorithm. We only need more EOS stablecoin projects for that, competing to make these three crucial factors work on the market.
The competition starts
Ethereum is by far the most widely used technology platform for stablecoins, but this year demonstrates the rising popularity of EOS-based stablecoins. Some experts even called EOS an “Ethereum killer” for its enhanced stablecoin functionality. 2019 has so far revealed EOS stablecoin projects like Equilibrium’s EOSDT, Carbon (CUSD), Pizza.live (USDE), and vUSD (Vigor, formerly EOSUSD). These teams generally explain their choice to develop on EOS as coming down to zero transaction fees, high performance, smart contract compatibility, and reduced latency. The EOS blockchain furthermore has a high throughput, allowing for thousands of transactions per second, which is far more than Ethereum can claim. This blockchain makes it possible to reduce the commissions and time involved in transaction processing to the point that a stablecoin can go truly mainstream.
This variety of EOS-based stablecoins indicates a maturing market — stablecoins running on EOS have definitely begun to compete with each other.
Carbon has tried new platforms, launching a stablecoin on Tron. EOS stablecoin swaps different digital assets and lists on exchanges. Equilibrium, the framework behind the EOSDT stablecoin, recently enjoyed a surge of new interest by implementing its REX staking functionality, allowing users to make extra profits on their EOS collateral holdings.
These are all good signs. The stablecoin competition between EOS and other major blockchain platforms (as well as the competition between centralized and decentralized stablecoins) lies in the options that larger players don’t have. These can include enhanced flexibility, innovative use cases, unique opportunities to serve or enrich DApps, and the ability to reach underserved communities on EOS and other blockchains.
Up until now, most stablecoin activity revolved around trading on EOS-based decentralized exchanges, or a number of other centralized exchanges. But we can expect wider EOS stablecoin adoption by traders, users, and DApp developers. This goes beyond financially minded applications to those like wallets, exchanges, gambling, and gaming services.
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