Stablecoins play an important role on the crypto market in Africa. In this article, we’ll show you why this is the case and what stablecoins actually are.
Definition and functionality of stablecoins
Stablecoins are cryptocurrencies that reflect the value of other assets such as fiat currencies or gold on a 1:1 basis. The best-known stablecoins are USDT, USDC and BUSD. All three reflect the value of a US dollar, but they differ in terms of the founding company of the stablecoin and some small attributes.
Stablecoins also have different functions. On the one hand, there are stablecoins that are backed by fiat currencies. For example, a USDT by Tether is backed by a US dollar. This ensures that the stablecoin does not deviate from the currency.
There is also a similar variant but backed with cryptocurrencies. This means that the stablecoin is backed by cryptocurrencies. However, as cryptocurrencies fluctuate, in contrast to conventional assets, not 100% of the value of the stablecoin is deposited, but more. For example, a crypto backed Stablecoin could be backed by 150% Ethereum to avoid volatility.
Furthermore, algorithms are also used to adjust the supply and demand for the coin with the help of smart contracts. So, if we take the example of USDT again, an algorithm would be used, which, as soon as the value of the USDT increases, also increases the supply, and, if the value of the targeted stablecoin decreases, also decreases the supply, so that the price is always constant.
Advantages and possible applications in Africa
The problem in Africa is that you have incredibly high local transaction costs, which very few people there can afford. However, the African inhabitants still want to be able to send money to their families across borders or simply use normal bank transfers. Stablecoins would make this possible. If stablecoins were also used by companies, the inhabitants could have their salary sent to their wallet as a stablecoin in the form of their currency and then use this as a means of payment or send it to their families across borders for comparatively very low fees.
Trading and using stablecoins on our exchange
At Uptota, we offer a large selection of stablecoins that are available on many different blockchains. Here you can trade, receive and send the stablecoins of your choice with very low fees.
Prospects and developments
Uptota wants to make stablecoin trading possible for every person living in Africa. We are planning to integrate our payment services into the everyday lives of Africans so that they no longer have to pay high fees for transactions, and everyone has free access to digital exchanges. We also want to have debit cards developed this year and introduce Uptota Pay.
