Stablecoins serve several useful purposes, most of which hinge on their premise of resistance to price volatility and maintaining stable value – primarily to an underlying peg. These include the following:
A medium of exchange
A stablecoin’s peg to a stable asset makes them ideal as a cross-border medium of exchange. Stablecoins provide the crypto-fiat payment infrastructure for all transacting parties in a commercial transaction, with the added convenience of accepting and holding this asset class for current and future uses.
Store of value
Any fluctuations affecting stablecoins tend to fall in a tight range and are therefore predictable. This represents their primary use as a store of value due to an inherent ability to maintain their underlying value, making them particularly useful for unstable, inflation-prone economies or where citizens have been restricted from using foreign currencies. Consequently, stablecoins may serve as hedge assets for wealth preservation. In the crypto space, users can park their volatile assets into stablecoins, especially in a period of a downward trend in market prices (bear market).
Trading on exchanges
Crypto traders may use stablecoins to buy other cryptocurrencies on exchanges where they do not offer trading pairs with fiat currency. A trader seeking to enter and exit from cryptocurrency investments can simply turn to stablecoins to avoid dealing with multiple transfers and compounding trading fees.
In-real-life (IRL) payments
At a time when stablecoins have started to gain the interest of many across the world, including governments which are considering adding them to their fold as an acceptable method of payment, they stand out as a better choice for the majority to use for payment purposes and business transactions.