What are use cases of stable coins?

What is stable coin?

Stable coin is a crypto asset, similar to Bitcoin or Ether. The main characteristics is that each stable coin is 'connected' to an asset the exists in non-crypto world, like a currency. The most basic example could be a stable coin called Tether, which is pegged to US Dollar (USD). Tether use symbol USDT in crypto world. As crypto is pegged to the real asset, it means you can exchange it back and forth with 1:1 ratio. E.g. 1 USDT is worth 1 USD.

What are most popular stable coins?

Below you can find a selection of most popular stable coins. USD pegged coins are by far most popular ones.

 USD pegged coins are by far most popular/used one. This is due to the crypto market being strong in the USA, and USD being considered most stable fiat currency. 

What are main use cases of stable coins?

Due to the fact that you can exchange stable coins for fiat money, the most important use cases is as a simple way to pay for things or services, avoiding volatility of non-stable coins, like bitcoin. Stable coins tend to have more-or-less stable value throughout the day, with change in line with normal currency change, i.e. typically 1-2%. Non-stable coins, like Bitcoin, Ether or Dodgecoin, can easily fluctuate 5-10% in value on a 'normal' trading day. In extreme cases a simple tweet by Elon Musk caused Dogecoin to increase 25% in value. 

One word: Doge

— Elon Musk (@elonmusk) December 20, 2020

Stability gives confidence to both sides of the transaction that the value that is being sent is the same that is being received. 

Another application is as an equivalent to a traditional bank (money) transfer. Normally if you want to do a bank transfer (or are waiting to receive one), depending on where you are in the world, it can take 1-3 days for the transfer to materialize - go from payer's account, through their bank to your bank, to your account. This gets even worse if you're doing a cross-border transfer, e.g. from US to Europe. Instead of using traditional banking network, payer buys stable coin, and transfers them to recipient in a matter of minutes, no matter where in the world they are.

Circumvent currency exchange. In case of cross-border payments you can avoid excessive conversion fees charged by the bank. Imagine you would have EURO (EUR) in your hand and want to pay for something in British pound (GBP). Traditionally you would have to exchange EUR for GBP using your bank. This is connected with 2-5% exchange fee (which is either explicitly shown to you by your bank or, in worse case, hidden by the bank by simply increased spread on the currency pair).