Analysis of the Possible Demand of Stablecoins

Abstract

Stablecoins, which are anchored by certain assets, have been gaining market attention in recent years as a branch of cryptocurrencies. The dollar domination in currency markets exists in cryptocurrency since some mainstream stablecoins anchor dollar. Looking back to when the Bretton Woods system was established, the dollar was pegged to gold and gradually became the worlds main currency. Dollar-based global stablecoins havent been completely developed, and their use on a global scale carries financial risks. This paper discusses the objectives of stablecoins and the differences between vision and reality based on existing literature and research data. In the process of realizing price stability, stablecoins also generate credit risk, and fall into the logical dilemma that leaving fiat currency and achieving price stability cannot be achieved simultaneously. This paper suggests that the compromise of stablecoin to centralization can solve part of current problems. Nevertheless, decentralization needs to be studied continuously in order to achieve stablecoins objectives.