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Feb 08, 2021

Stablecoin Use Cases on Algorand: Here's What's Possible

By: David Markley

Algorand’s ability to meet the high-volume demands of modern financial institutions whilst offering reduced transaction costs, transaction finality and robust security has led to an increase of stablecoins to the platform - including market leaders USDT and USDC. For more information on stablecoins and why many are choosing Algorand, check out this article

Discover the complete list of stablecoins on Algorand as well as the most promising stablecoin use cases for global finance.  

What Are Stablecoins?

While volatility in an asset can be a compelling characteristic in certain situations (such as when trying to generate yield), it is not a helpful property when trying to account for an item's value or when the asset is used as a medium of exchange. Unlike a number of digital assets that are subject to significant price fluctuations, stablecoins - as the name suggests - provide price-stability. Stablecoins have generally become defined as digital assets backed by a relatively low volatility asset. 

Price-stability is typically achieved by backing the stablecoin with reserve assets, either in the form of fiat currency or a commodity. For example, USD Coin (USDC) is backed 1:1 by U.S. dollar reserves held in U.S. financial institutions. 

Stablecoins are a type of digital asset designed to maintain a stable value, typically linked to a fiat currency or a commodity, and have found product market fit when it comes to transacting and accounting.

Stablecoins are now used in real-world instances; from cross-border payments to functioning as banking infrastructure for those without access, stablecoins are growing in popularity around the world. 

List of Stablecoins on Algorand

The following stablecoins can already be found on the Algorand blockchain:

Tether USD 

Tether is a market-leading stablecoin issuer that launched the largest stablecoin by market capitalization, Tether USD, in 2014. Since then, USDT has managed to maintain its first-mover advantage to establish itself as the leading stablecoins for cryptoasset traders and investors. 

USD Coin 

USDC is a fully-reserved U.S. dollar-backed stablecoin, launched by industry pioneers Coinbase and Circle. Each USDC is backed 1:1 by U.S. dollar reserves held in regulated U.S. financial institutions and is subject to monthly attestation by a leading global auditing firm to provide utmost transparency for its holders.  

realioUSD 

Realio is an asset tokenization platform that democratizes access to illiquid investments, such as real estate. To enable its users to seamlessly invest in tokenized real estate investments on its platform, Realio has launched a U.S. dollar-backed stablecoin called realioUSD (rUSD). 

QCAD 

Stablecorp is the company behind the first-ever fully-compliant Canadian dollar stablecoin, called QCAD. Stablecorp chose Algorand to explore new, scalable enterprise and consumer implementations of its stablecoin. What’s more, QCAD is the first non-U.S. dollar-backed stablecoin to be issued on Algorand, enabling a synthetic USD/CAD trading pair on the network. 

Monerium 

Monerium is a fully licensed e-money fintech company working to deliver a digital currency platform on which users can transact in digital currencies between individuals and businesses, as well as facilitate the cross-border exchange of the digital Icelandic krona, digital euro, and digital British pound. 

Meld Gold 

Meld Gold is issuing a gold-backed stablecoin on the Algorand blockchain, not only to improve transaction speeds and efficiency but also to streamline the gold supply chain in a manner that opens up investment opportunities to everyone across the globe. Learn how Meld is moving the friction from the metals industry in the following video:

MESE USD Exchange Token

MESE is a blockchain-powered micro equity stock exchange that allows investors to buy very small amounts in a selection of stocks. MESE issued a stablecoin on the Algorand chain, called MESE USD Exchange Token (USD-MESE), to facilitate trading on its platform. 

Marshall Islands CBDC (SOV)  

The Marshall Islands SOV is the Pacific island’s central bank digital currency (CBDC), which is set to launch with the support of Algorand in the near future. The Algorand blockchain was chosen by the Marshall Islands government for its speed, scalability, security as well as its ability to implement required compliance controls and the transaction finality required for a sovereign digital currency.

Transfero

Transfero Swiss AG is an international financial services company that has created the first-ever Brazilian real stablecoin - called the Brazil Real Digital Token (BRZ) - to provide Brazilians with access to a global stablecoin backed by their sovereign currency. 

Stablecoin Use Cases on Algorand

As the leading scalable, secure, and fully decentralized blockchain network that provides instant transaction finality, Algorand’s innovative design has attracted many market-leading stablecoins, including the two market-leaders, USDT and USDC. Incorporating stablecoins with the burgeoning Algorand ecosystem and advanced Algorand technology allows for a growing number of financial and economic uses.

Below are several key use-cases of stablecoin adoption:

Payments (including cross-border payments)

As a means to reliably exchange and store value, stablecoins are an essential component to a modern financial system. Without digital currencies, sending funds to another part of the world is slow and costly. Stablecoins can be transacted around the world at far greater speeds for a fraction of the cost when compared to SWIFT or Money Transfer Operators. This has huge implications for global exchange of value.

Algorand's blockchain supports numerous plugins that make it easy and simple for companies and consumers to transact in digital currency, such as Bleumi’s payment solution for ecommerce platforms and the Algorand wallet with its user friendly functionality.

Access to Crypto Capital Markets

Stablecoins serve as a major on and off-ramp in the crypto capital markets. Platforms connected to Algorand such as Archax,Coinbase, and Huobi provide users with significant gateways into the world of digital asset investments. 

Another example is Republic, an investing platform that leverages Algorand to provide anyone with access to unique investment opportunities that traditionally have been reserved for venture capitalists and institutional investors.

Settlement Layer 

Algorand’s features make it an optimal network for stablecoins to act as a settlement layer in crypto OTC trading transactions. Crypto traders have historically had to wait from funds to transfer from exchange to exchange primarily waiting on Ethereum network transactions to clear. Now, leveraging Algorand based stablecoins, traders can move their funds between exchanges instantaneously at effectively zero cost. 

Accessing Yield in Blockchain Enabled Markets

The Future Finance (“FutureFi”) market is an Internet-native financial ecosystem that leverages blockchain technology, cryptocurrency, and smart contracts to enhance, and expand traditional financial services by creating new assets and making traditional assets more efficient. 

From decentralized borrowing and lending to providing liquidity in the digital asset trading pools, FutureFi provides new ways for crypto-savvy investors to generate yield on their digital asset holdings. Stablecoins have become one of the most popular assets to use as collateral in yield-generating protocols. 

On Algorand, there are platforms such as Voyager, a cryptocurrency trading platform where users can lend stablecoins and other cryptocurrencies to earn up to 9.5% APR.

Banking

With a large percentage of the global population not having access to banking services, stablecoins are an inclusive and accessible platform built on Algorand to provide financial access for everyone. With open, decentralized systems like Algorand, where miniscule transaction fees open the doors for micropayments, the barriers to access are immediately lowered. Stablecoins on these high performing networks provide users with full custody of their funds and 24/7 access to financial services. Through Algorand’s ecosystem of partners, users can even access their funds and conduct payments with minimal or no network connectivity.

Store of Value

When faced with an economic crisis, such as a weakening currency, stablecoin platforms can make a world of difference. Any available stablecoin on the Algorand blockchain offers an opportunity to take control of one's finances and circumvent poor economic conditions.

Further Reading: Stablecoins & Payments

What are stablecoins and why is Algorand a leading platform for them?

If you want to learn more on stablecoin basics and how Algorand’s architecture is empowering assets like stablecoins, check out “An Introduction to Stablecoins for Banks and Fintechs” By Barry Finkelstein:

Report: The Future of Global Payments

Algorand recently partnered with OMFIF DMI, Citi, Mastercard, Novi (from Facebook), PayPal, SWIFT and others, to publish a landmark industry report which examines how the future of payments will look. The 68-page paper surveys central banks’ and regulators’ opinions as to the challenges and opportunities they face, and brings to light where the future of payments is heading.

Fill out this form to download the report: