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Most transactions occur in currencies other than U.S. dollars, and not all countries have the same degree of financial transparency. The platform has features like high compatibility with all devices, a massive range of trading tools, and many more. Unfortunately, as a result, tracing funds can be challenging and time-consuming — if not wholly impossible. For a better trading experience, use a trusted trading platform like BitiCodes.

In this post, we’ll explore how blockchain technology could revolutionize the means of accessing fiat currency and make it more efficient to track payments throughout global banking systems, helping to reduce fraud by more accurately identifying a fraudster’s location.

Stablecoins:

To make global transactions more straightforward, more efficient, and less costly, various companies are now developing stablecoins. A stablecoin is a type of cryptocurrency with low volatility against the world’s major currencies, such as USD and EUR. They are usually pegged to real-world assets and have been specifically designed to combat the high price volatility issues that many digital currencies face.

Today there are several different types of stablecoins available on the market:

Fiat-collateralized — Stablecoins backed by fiat (USD or EUR) deposits in an audited, transparent bank account. Stablecoins use algorithmic monetary policy to maintain a fixed exchange rate backed by digital assets. Example: Basis

The most popular types of stablecoins are fiat-collateralized and those backed by USD deposits in an audited, transparent bank account (e.g., Tether). As the name suggests, these tokens back each unit with a 1:1 ratio with the value of the real-world currency. For instance, Tether is supposedly fully collateralized by USD and has been operating since 2014 without significant security breaches or hacking attacks.

Commodity-collateralized – Stablecoins backed by commodities (e.g., gold or oil).

Commodity-collateralized stablecoins are also gaining popularity since they offer a more robust form of stablecoins. The value of these coins is pegged to the market price of a physical commodity and not to the value of fiat currency.

For instance, Kinesis issues digital tokens backed by precious physical metals. Market price movements, therefore, influence the value of the tokens in gold and silver. According to reports, these coins have been designed specifically to address the limitations of Tether’s business model, such as transparency and trust issues (e.g., lack of audits).

Coin-collateralized – Stablecoins backed by a pool of coins from multiple blockchains and companies. It can create exciting opportunities for stablecoins projects to provide cross-chain services and support assets from different blockchains while leveraging the stability provided by Ethereum or Bitcoin as a base layer without relying on the price of ETH or BTC directly.

Here’s a breakdown of what blockchain can do for fiat currency.

Blockchain can make it easier to identify the sender and receiver of funds by ensuring that all participants have a transaction history that is easily accessible. In addition, it would provide significant security benefits since it would help eliminate fraud and money laundering within the financial system.

In addition, blockchain technology could significantly reduce processing costs by allowing companies to process payments without going through third-party financial service providers such as PayPal or Western Union. Blockchain technology creates an inexpensive, decentralized way of securely transferring digital assets from one party to another. In short, blockchain for fiat currency could create a global network through which individuals, organizations, and governments can send and receive money instantly, securely, and at little to no cost.

Is Cryptocurrency Better Than Fiat Currency?

We expect blockchain technology to create new, more efficient, open payment systems for fiat currency. In addition, as the popularity of cryptocurrency grows, this would help to make blockchain technology an attractive alternative to existing fiat currencies such as USD and EUR.

For instance, in terms of blockchain technology, we can see how companies like Ripple and Stellar are trying to attract new real-world business investors into their platforms by providing tools such as a cross-border payments gateway that facilitates instant transactions across currency exchanges. For example, suppose a company or organization uses blockchain technology for fiat currency transactions. In that case, it will be able to link the company’s digital assets to its bank accounts in real-time during each transaction.

Limited Supply:

Another essential benefit of cryptocurrency is how it’s distributed. The organization can cap the number of available coins in a cryptocurrency’s network, or its supply can be limited using blockchain’s decentralized ledger technology. However, the amount of fiat currency is not capped, and its supply is generally manipulated to prevent deflation. For instance, quantitative easing involves manipulating the money supply to stimulate economic growth and inflation.

In addition, many countries are seeing record levels of government debt with no signs of slowing down. For example, a recent report from the International Monetary Fund (IMF) indicates that gross debt (public and private) reached 225% of the gross domestic product (GDP) of the U.S. government in the first quarter of 2018. The IMF also expected that U.S. debt levels would rise to over 300% of GDP by 2022 and the Eurozone debt levels would reach 250% by 2020.

Fiat currencies could become more expensive and possibly even worthless in this environment. It means people could be put into a situation where they are stuck with higher prices for goods and services and significant debt burdens that people may never pay off.