Everything About Cross-chain Stablecoin Payments
The advent of bitcoin and blockchain technology marks the beginning of a new chapter in digital payment. There are nearly 6000 cryptocurrencies that together have paved the way for a revolutionary virtual payment system through a distributed network with no intermediaries involved. Due to their unique features and permissionless nature, cryptos have become enormously successful in many industries, including finance, healthcare, retail, supply chain, and more.
However, the adoption of cryptocurrency in the payment industry has been constrained because of the volatility in cryptocurrencies. In this regard, blockchain enthusiasts continue to present a better approach to address the existing challenges. One such popular approach is using Stablecoins pegged to the value of an underlying asset, mainly US dollars. Stablecoins are relatively new. Hence, most people seem confused about it. Let’s answer their queries and understand Stablecoin along with its impact on cross-chain payments in this insight.
What is Stablecoin?
A Stablecoin is a digital currency pegged to an asset with a ‘stable’ value such as the US dollar or gold. When compared to cryptocurrencies, Stablecoins holds high potential to address the volatility issues. That’s so because cryptocurrencies have relatively small market capitalization, which tends to experience fluctuations and high volatility with daily buy and sell orders. Thus, Stablecoins appears to be the best form of digital currency to suit everything, including daily e-commerce transactions to crypto token exchanges on blockchains.
We can understand Stablecoins as a tokenized representation of real-world currency or fiat currencies. More simply put, if 1USDT (Tether) equals 1 USD, Stablecoin is expected to maintain this peg regardless of the market fluctuations. Stablecoins are mainly of four types: Fiat-backed stablecoins, precious metal-backed stablecoins, algorithmic stablecoins. To learn more about stablecoins, read our detailed insight.
What is Cross-chain Technology?
Cross-chain technology refers to an emerging technology that enhances interoperability between independent blockchains. Every blockchain is designed to perform specific actions to address the limitations of existing blockchains. For example, bitcoin was introduced to replace traditional currency with digital cryptocurrency. Whereas, Ethereum came up with smart contract technology to empower the use case of blockchain across Fintech industries. Due to the lack of interoperability and siloed nature of both Bitcoin and Ethereum, users cannot share information between these blockchains.
The good thing about blockchains is that they are unique, but they share identical basic infrastructures, and that’s where cross-chain technology makes its way. With the rapid expansion of the blockchain networks and the constant introduction of new blockchain projects, cross-chain interoperability becomes crucial. It allows blockchain ecosystems to interact with each other even though they exist on their separate chains. With this technology in place, blockchain can share information, tokens, data, and, more importantly, Stablecoins between diverse blockchain networks.
Technologies like Cross-chain swap, cross-chain token exchanges, and the decentralized token bridge are perfect examples of how cross-chain-powered innovations have been bridging the gaps between blockchain and its real-world implementations. By enhancing the blockchain interoperability, cross-chain preserve the decentralized nature of blockchain while unlocking various utilization opportunities across newer industries.
What are Cross-chain Stablecoin Payments?
Cross-chain Stablecoin payment is much like the cross-chain crypto exchange. Particularly in the context of Stablecoin, cross-chain technology allows two inherently different blockchains to interact with each other for sharing Stablecoins or making payments in Stablecoins. For instance, Mike on Ethereum blockchain wants to send Tether to Jack on Binance Smart Chain. In return, Mike is entitled to receive Binance USD from Jack. Since BSC and Ethereum are two unique blockchains, they cannot allow blockchains to interact and exchange Stablecoins. Cross-chain technology enters the game to solve this interoperability issue. It establishes secure connections between these two blockchains and facilitates instant Stablecoin exchange.
Cross-chain enabled Stablecoin payments to bring many benefits for the issuers. They can mint and buy back coins and can redeem the outstanding Stablecoins whenever needed. With the ability to quickly convert volatile assets into Stablecoins, one can escape from the crypto market fluctuations. Moreover, first and second-generation blockchains, Bitcoin and Ethereum, do not efficiently support everyday transactions due to their scarce computing resources and relatively high fees. As a result, users seek the freedom to choose the desired blockchain protocol that suits their day-to-day payment and settlement requirements. Their search ends at cross-chain Stablecoin payment options where payments can be done in any Stablecoins without any brainstorming techniques.
Why Do We Need Cross-chain Stablecoin Payments?
A peer-to-peer decentralized payment system is one of the most prevalent use cases of blockchain technology. The idea was to eliminate the third-party entities from the payment process and allow people worldwide to participate in a trustless distributed network. Also, note that blockchain initially appeared to power cryptocurrency transactions. However, the overgrowing popularity of alternative currencies such as Stablecoins and the rapid rise in their circulation has encouraged many organizations (banks or financial institutions) to issue their Stablecoins for block-based payment purposes.
Similar to crypto tokens, Stablecoins have also been circulated on various blockchains that remain isolated from each other. Before the advent of cross-chain technology, Stablecoins transfer between blockchain was enabled by a centralized entity or middleman. Users first need to deposit their Stablecoins to this middleman. This approach of giving custody of money to a middleman breaks the essence of permissionless and decentralization in Blockchain. Thus, Cross-chain stable payments eliminate the need of intermediary institutions in facilitating exchange or transfer of Stablecoins in peer-to-peer decentralized payment platforms.
What Stablecoin Development Services do LeewayHertz Offer?
Our Stablecoin consultant helps you gain a better understanding of your blockchain project’s prospects. We create the roadmap for your project, defining the market analytics, business strategies, technical aspects, development, and delivery process.
We have a team of subject matter experts to help you deliver impact messages to your targeted audience through comprehensive white papers. Keeping in mind the potential of your project, we provide whitepapers explaining the key role of your project in solving real-world problems.
We develop a variety of Stablecoins, including fiat-backed, crypto-currency-backed, precious-backed, and commodity-backed Stablecoins. We also create multi-collateral Stablecoins based on decentralized governance.
We have a core team of Stablecoin experts who work with you to create growth hack strategies to reach targeted investors. Our team is skilled in conducting market research activities such as email marketing, PR outreach, social media marketing, and other marketing hacks.
Payment & AML/KYC Services
We also offer payment services for clients that can expand the use case of Stablecoin with multiple payment options. To further raise the security, we integrate AML/KYC in the payment solutions that help you investigate investors’ identities.
Community support management
Our dedicated team provides community support via instant chats, ticketing systems, and crypto forums. We make sure investors get their queries resolved instantly.
The emphasis of Stablecoin has always been on creating less volatile and high liquidity-backed assets. That being said, this industry has to undergo many challenges to position itself in today’s competitive financial ecosystem. The Stablecoin industry should collaborate with regulators and discover a more advanced framework that can address the challenges of cross-chain stable coin payment. This industry has the potential to alter the way virtual payments are done. Stablecoins, with their basic cash-like features combined with blockchain-inherent properties, make digital payments more secured, transparent, frictionless and instantaneous across various use cases like cross border payments.
We hope that this article helps you to understand the cross-chain Stablecoin payment system. If you are looking for a reliable Stablecoin development service, contact our Stabecoin developers. We assist you throughout the development process, from ideation to designing a token and developing it.
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