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Coinbase CEO Starts Fiat-Backed Stablecoin Inflation Discussion

  • Coinbase CEO, Brian Armstrong, starts a conversation about fiat-backed stablecoins.
  • Armstrong’s tweet got almost a thousand replies within four hours.
  • Various Twitter users replied from trolls, promoters, and serious answers.

Fiat-backed stablecoins have been successfully splitting the room in various discussions. With Bitcoin, along with other cryptos being argued to be a hedge against fiat inflation, how does fiat-backed stablecoins fare? This is the topic that Coinbase CEO Brian Armstrong brought to his followers.

If fiat backed stablecoins really become inflation coins (not so stable), then how will we get a coin that is truly stable?

Perhaps something that tracks a basket of real world goods (purchasing power parity) using oracles?

Ideas welcome.

— Brian Armstrong (@brian_armstrong) September 15, 2021

One tweet argues that the supply-demand relationship has been changing. Generally, equivalents cannot keep up with the changing supply-demand relationship. Based on his take,  he says it is difficult to anchor any physical object. This, according to him means, stablecoins is an illusion. 

On the other hand, some believe that the problem with achieving a fiat-based stablecoin lies on the neutral issuing authority. Therefore, stablecoins must operate almost entirely in an algorithmic system, decentralized, trusted, and chain agnostic to avoid SEC dilemma.

What Is Stablecoin?

A stablecoin is a new type of cryptocurrency that aims to provide price stability by backing itself with a reserve asset. Stablecoins have gained popularity since it tries to combine the best of both worlds. That is, stablecoin’s rapid processing and security or privacy of cryptocurrency payments. Even more, the volatility-free and stable prices of fiat currencies. Hence, stablecoins are considered to be vital to the crypto market because traders utilize them to buy Bitcoin and other virtual currencies.

Is There a Need for Stablecoin?

While some crypto enthusiasts believe it is possible to have a stablecoin, others feel we can only achieve a ‘near stablecoin.’  In the discourse, a tweet claims, basket of goods is not going to be a stable unit of account because they will get cheaper as technology advances and as many of them get demonetized by Bitcoin (BTC). 

In conclusion, the crypto industry won’t end the search for a stablecoin. More investors are partnering to achieve a stablecoin. The crypto community is mostly in agreement that some stablecoins will have a good future.

   

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