A major issue with current stablecoin is that most of them are based on fiat currencies.
For years, Tether’s USDT has been the go-to stablecoin, especially at crypto exchanges that do not use fiat currencies. While USDT is a popular stablecoin, it has been dogged by rumors and speculation that the stablecoin is not backed by real US dollars. As the suspicion has spread, various players have decided to launch their own stablecoins.
Different Types of Stablecoins
While fiat-backed stablecoins were the first to launch, various other models have been proposed and launched. Today, there are three main types of stablecoins:
All stablecoins have various mechanisms in place that are intended to keep the value as close as possible to one dollar.
The Problem with Current Stablecoins
A major issue with current stablecoin is that most of them are based on fiat currencies. However, if you have been keeping with the financial markets, you have had of the looming crash. The market could soon crash due to the COVID19 outbreak.
Numerous companies around the world have already filed for bankruptcy. When economies go into recession, their fiat currencies also experience high inflation. Consequently, using fiat-backed stablecoins only works well when the economy is doing well.
Crypto-backed fiat currencies are not a great alternative either. The problem with them is that crypto, one of the most volatile assets, backs them. While most of them are backed by the top crypto coins, most of these coins prone to sudden price fluctuations. Thus, it can be expected that crypto-backed stablecoins would not fare well in times of economic turmoil
Non-backed stablecoins are the latest alliteration of stablecoins. These coins are also called algorithmic-backed stablecoins. One of the most prominent ones in this category was Basis. The stablecoin coin would rely on a complex system of smart contracts and bonds for its stability. However, the project had to shut down because of regulatory pressure. The main downside to this model is that it is still untested.
The OZP Alternative
One project that aims to find an alternative solution to the stablecoin conundrum is the Ozalentour project. Ozalentour is a blockchain-based ecosystem that enables the exchange of services, goods, and value. It combines the human experience of a social network with a decentralized marketplace.
Currently, Ozalentour platform users rely on intermediaries in the fiat currency world to confirm transactions. Once it is fully operational, the platform will be powered by Ozaphyre (OZP) token.
OZP is an ERC20 token that runs on Ethereum. To stabilize its price, 25% Ether and various partner markets collateralize OZP. The asset’s value is stabilized in the average value of the Euro over five years. The first IEO round of OZP was completed onABIT.COM and the second round is live on P2Pb2b.io. OZP tokens are expected to list in ABIT.COM and P2Pb2b.io on 1st August.
The stablecoin market is still young, relative to the fiat currency market. However, projects such as OZP are showing a lot of promise. By stabilizing the OZP tokens using more than one asset, it helps to ensure that even if one asset fails, others can step in to stabilize the price.
Note: Please do your own research and attain enough understanding before investing in any crypto-oriented platform.
All opinions expressed in the above article are solely of the author’s and do not reflect the opinion of the Global Crypto Alliance Ltd., any of its affiliations or any other company. This article is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. The Global Crypto Alliance Ltd. strongly recommends that readers conduct their own research and due diligence into the company, product or service, if any, that may be mentioned in the above content.