Let’s start from the Stable Coin
A stable coin is a cryptocurrency that is pegged to the value of an underlying asset or has a programmatical algorithm to keep its price stable. They are called stable coins because the value of these cryptocurrencies are kept stable in relation to the underlying asset or its value in the market.
The value of a stablecoin thus relies on another asset that has already been given value. These assets can be fiat currencies, commodities such as gold, silver and oil, but also assets such as real estate. Preferably, the asset to which the stablecoin’s value is pegged to is relatively stable in value, but this is not a must.
Stablecoins leverage all the advantages of cryptocurrencies. They are cryptographically secured, easily and rapidly transferable between parties, and anyone with access to the internet can create a wallet and own these stablecoins.
However, stablecoins are not subject to the extreme price volatility that regular cryptocurrencies are affected by.
Where cryptocurrencies have a maximum limited supply that leads to major shifts in price with every change in demand, stablecoins are pegged to the value of an asset. This keeps the value of stablecoins relatively constant and makes these cryptocurrencies highly useful both a store of value and as a method of payment.
There are two types of stablecoins:
Stablecoins that are backed by the asset it’s pegged to. These are legally-backed stablecoins. If ever something goes wrong, holders of this type of stablecoins are legally entitled to the underlying assets.
Stablecoins that are kept stable in comparison to the price of the asset but do not represent ownership of the asset. This type of stablecoin is kept stable through ingenuous, complex systems that prevent divergence between the price of the asset and the stablecoin.
Benefits of Stable Coins
Stable coins have the potential to boost the use of cryptocurrencies and push them into mainstream usage. This is due to the absence of the enormous price volatility which most cryptos are susceptible to while leveraging the benefits of blockchain technology.
This major benefit is particularly well-demonstrated in the remittance market. Remittances are financial transactions made by people who work overseas who send their wages home to their families. This large financial sector is highly inefficient due to the high cost of these remittances; and it’s the users who suffer as their wages are eaten up by high transaction costs.
Blockchain technology offers a way to make this industry far more efficient. However, due to the price volatility of cryptocurrencies, they are still far from the ideal solution for migrant workers. If a migrant worker sends Bitcoin to his or her family back home, a sudden 15% drop in value still means that 15% of the value has vaporized.
Stable coins solve this issue by allowing anyone to open up a wallet and enabling near instant transactions of these coins, but with the absence of price volatility.
The above described benefit applies to many more industries that want to leverage the benefits of cryptocurrencies but don’t want to be exposed to the price risks. For instance, retailers can start accepting stablecoins for purchases, individuals can use stablecoins as a store of value and don’t need to go through third parties to transfer and store these digital assets, and anyone with access to the internet can open up a stablecoin wallet.
These are advantages that will make stablecoins highly useful in the future once crypto finds its way into mainstream, but they also present major advantages to parties that are already in the crypto space like investors, traders and providers of crypto-related services.
For investors and traders, stablecoins provide a safe haven during a market crash without having to transfer their capital back to fiat currencies. Through stablecoins, this protection can be executed within minutes without having to deal with issues related to fiat currencies such as:
Lack of fiat currency support in exchanges: Only a few exchanges support fiat currencies due to strict regulations. However, transacting with stablecoins is much easier to allow for.
Slow transaction times: Sending fiat back and forth between your bank accounts takes days.
Regulations limiting crypto transactions: Banks are cracking down on crypto-related transactions, meaning that overnight you could be prevented from sending money to a crypto-related company.
Additionally, stable coins allow decentralized exchanges to create crypto-fiat trading pairs. Onramps for fiat to decentralized exchanges have been proven to be extremely difficult as most financial companies don’t want to get connected with these exchanges.
Stable coins solve this problem. This is great news as decentralized exchanges (DEXs) are unhackable on a broader scale; only individuals can get hacked but not the exchange as a whole. DEXs have been having a hard time attracting traders and stablecoins could give rise to a great influx of new users.
Moreover, stablecoins solve the problem of having to think in terms of Bitcoin or Ethereum when trading cryptocurrencies. Since most exchanges don’t deal in fiat, investors and traders have to think in crypto values.
Our Improvement of Stable Coins - The Income Coin
Income Coins give all the advantages of a stable coin with profits on top.
As with Unit Trusts based on income stocks and shares, we aim to seek high income generating assets to both pay dividends and increase the value of the fund.
Income focused investment produces more stable growth of value as it has two sources of growth, the value of assets and their dividends or revenues. In the case of Thrupny, the revenue portion will be mainly from property rental but may include other elements such as property operation or business revenues. Therefore...
Total Return = Capital Gain + Investment Income
When speaking about income investing in the traditional stocks and shares market,
“Historically, dividends have made up a significant portion of the total return from equities. If higher returns are your goal, an effective way of achieving this is to reinvest the income from dividends” According to Michelle McGrade, chief investment officer of TD Direct Investing, writing in 2017. (Article: https://www.globalbankingandfinance.com/the-importance-of-total-returns-and-how-it-enhances-profits-across-different-market-environments/ )
So how does the First Income Coin, Thrupny, work?
Get the White Paper at https://www.thrupny.com