Cardano has launched a stablecoin called USDM - backed by Fiat money.
For users who follow my content for some time know that I have spoken on many occasions of the cryptocurrency CARDANO ($ADA), because I am very interested in what it can offer in the future, plus I have a small investment in ADA, then all the news related to the subject are of my interest.
For your convenience I will leave a list of content where you can quickly see what are the topics of this article, and so you can read the one you like, thanks for being here and let's start today's information.
Image created in Bing AI - Edited in Photoshop CC
Table of contents for this article:
♦️ Cardano and its development.
♦️ Inclusion of USDM stablecoin in Cardano.
♦️ Possible impact on the network after this news.
Edited in Photoshop CC
Cardano and its development.
Cardano is a blockchain platform that has earned a solid reputation for its long-term approach and commitment to security, scalability and sustainability, or at least it promises to deliver, so far we are waiting.
Its modular architecture and consensus protocol, Ouroboros, have attracted the attention of developers and cryptocurrency enthusiasts, and among those it has attracted me, I just hope I'm not wrong on this one, as not everything can be predicted going forward about what may happen with ADA.
The Cardano network has become a fertile ground for DeFi projects, NFT and other decentralized applications, and the moment they also include to their list some gamified projects like NFTs games, maybe many users will be interested in the network, and that will give it more value, because we cannot deny that Play2Earn loving users are many, and the implementation of this in the ADA network would be a total madness, but these are just ideas I have, because analyzing things better it may not work, or maybe yes....
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Inclusion of USDM stablecoin in Cardano.
Recently, cardano has welcomed its first stablecoin fully backed by fiat, this was something that was not in that network, therefore, it is a novelty for many active users and believers in ADA, as well as me, because the moment I saw this news I was impressed and immediately thought about the possible results of all this.
USDM is the name of this new Fiat-backed Stablecoin, and for those who do not understand very well what the term Fiat means, or do not understand very well what is the relationship of Fiat money with a cryptocurrency, I explain that this term refers to the USDM is backed by fiat or real currency so to speak, outside of being a digital asset, such as the US dollar (USD), the euro (EUR) or any other currency issued by a government, but surely you are thinking the same as me, is there something wrong with this, The answer is yes, and at the same time no, because there are advantages and disadvantages to the USDM being backed by Fiat.
Benefits:
♦️ Value Stability: USDM being a fiat-backed stablecoins, it will have a stability in its value, this means that its value does not fluctuate as much as other more volatile cryptocurrencies such as Bitcoin or Ethereum. Users can be confident that its value will remain close to parity with the Dollar$.
♦️ Ease of Use: Being fiat-backed, USDM will be a more widely accepted digital asset used in everyday transactions. Traders and exchange platforms accept them more readily due to their stability.
♦️ Reduced Volatility: For investors and users looking to avoid market volatility, fiat-backed stablecoins offer a safer alternative, and that's where USDM comes in.
But it's not all good news, because likewise, as with many other Cryptos, there are disadvantages, and here I'll tell you a bit about them.
Disadvantages:
♦️ Dependence on Trust: even though they are backed by fiat, they still require trust in the entity issuing them. If the entity is not transparent or does not have enough reserves to back all the coins in circulation, there could be problems, it is as if each HIVE were backed by 1 LEO token of the Inleo project, if it gets to the point that more HIVE are issued than the amount of LEO token, there will be a lot of HIVE in circulation but not the right amount to back it up then everything would be failing, it is just a somewhat clumsy example, but easy to understand, for 1 HIVE to exist there has to be a LEO token to back it up.
And likewise, for a USDM to exist, there must be a $1 in Fiat currency to back it up.
♦️ Regulatory Risk: fiat-backed stablecoins may be subject to government regulations. Changes in laws or policies can affect their operation and acceptance, which is the main reason why we prefer everything to be handled on the blockchain and not have much, if anything, to do with government regulations.
♦️ Centralization: Unlike decentralized cryptocurrencies, fiat-backed stablecoins, as in this case with the USDM, will depend on a centralized entity for issuance and backing. This goes against the fundamental principle of decentralization in cryptocurrencies, which is what I talked about in the previous paragraph.
Image by Mehen - Edited in Photoshop CC
Possible impact on the network after this news.
Cardano has undoubtedly marked an important milestone with USDM, This stablecoin, backed 1-1 by the US dollar, offers a reliable alternative for users who seek stability in our transactions. Unlike other stablecoins in Cardano, such as $DJED and $IUSD, which are algorithmic and synthetic and have failed in their role to remain stable, and if you do not believe me about the failure of this concept of algorithmic stablecoins here I leave these two images of the examples mentioned above.
Now here what makes the difference is that USDM is based on a reserve of real dollars, no algorithmic tricks that will not work in the future.
The inclusion of USDM in Cardano has several implications, and for this reason I believe that it will give more value to the network and will attract the attention of new users or potential investors, in addition to giving more interest to project creators to host new Dapps in this network.
♦️ Enhanced liquidity: The availability of a fiat-backed stablecoin facilitates transactions and liquidity on the network. Users can move between ADA and USDM without worrying about the volatility and price or value change involved.
♦️ Wider adoption: the presence of USDM could attract new users to Cardano, especially those looking for a stablecoin for their daily transactions, what would we be without USDT, it would be total risky madness to do daily transactions without the value affecting us, but just as we use USDT to avoid the loss of value of our assets, so can we now use USDM.
♦️ Confidence in the ecosystem: The existence of a USD-backed stablecoin may increase confidence in Cardano and its ability to support decentralized financial applications or as we all call them (Dapps).
If USDM becomes a popular option for Cardano users, it could increase demand for ADA. In addition, the improved liquidity could attract more investors and traders to the network, which could positively influence the price of ADA, and that brings as a consequence an increase in value of my ADA tokens, because as I mentioned at the beginning, Cardano interests me for the fact that I have a small investment in the ADA token, but there is also the possibility of an increase in demand for ADA tokens.
However, there is also the possibility of USDM competing directly with ADA as a store of value. Some users may prefer to hold USDM rather than ADA because of its stability. This could affect the demand for ADA and therefore its price, but although this is a possible speculation that I mention here, the real scenario of this could happen, but I really don't think it will.
Or at least I hope not hahaha, here I come to the end of this article, and I hope you find the information I have shared here very helpful, happy day to all and thank you very much for reading my content.
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