#44 Redefining money: how stablecoins outperform traditional dollars

Last week we started exploring stablecoins, a special type of crypto coins that hold their value at $1. Think of stablecoins like USDC, Tether, and DAI as digital dollars that you can use for daily transactions without worrying that their value is going to go up or down. Because stablecoins use the power of the blockchain, they have characteristics that make them superior to traditional fiat currency like dollars or euros.

Stablecoins are superior because they are programmable, permissionless, borderless, low cost, interoperable, settle fast, and highly liquid. Let's quickly explore each one.

Programmable means you can program stablecoins to do things automatically. If I get my paycheck in stablecoins, I can write a smart contract that will automatically send a portion to a DeFi lending product to earn interest, exchange a portion of it to Ethereum, and send the rest to my bank. All automatically.

Permissionless means that I can send or receive coins with just a wallet address. I don't have to go through a bank or a centralized entity.

Borderless means that it doesn't matter if the receiver is in the US or in Djibouti. There is no concept of borders in crypto which makes it affordable to send money internationally.

Low cost means the fees are low. You only have to pay for gas fees which can be high on Ethereum but very cheap on Polygon or other layer 2 chains.

Fast Settlement means it takes minutes to settle a transaction, not days. I can send money right now, and you will get it in 5 minutes.

Interoperable means stablecoins can plug into any web3 protocol or application, and work seamlessly.

Highly liquid means stablecoins can be easily bought or sold. There are more than $55 billion of USDC alone.

All of these factors mean that stablecoins have superpowers. They will unlock new opportunities that are not possible with fiat currency and our current banking system.

Disclaimer: For informational purposes only. Not investment advice.