Why Stablecoins Could be the Future of Savings

In the modern age, stablecoins offer a new and potentially better way of saving money. Traditional methods of saving, such as keeping cash under the mattress (which I have done many many times) or putting it in a savings account at a bank, are no longer as effective as they once were.

It doesn't take a smart person to realize that inflation, economic downturns, and other factors have erode the value of these savings over time. Even with savings accounts at banks, the interest earned may will not keep up with inflation, resulting in a decline in purchasing power.

The Stability of Stablecoins

Stablecoins, on the other hand, are less susceptible to these types of economic risks. Because they are pegged to a stable [asset](https://leofinance.io/@leoglossary/leoglossary-asset), the value of [stablecoins]( https://leofinance.io/@leoglossary/leoglossary-stablecoin) tends to remain relatively 'stable' over time.

This makes them an attractive option for people who want to save money for the long term as its value or purchasing power does not erode over time.

Let's say I wanted to save money for a down payment on a house in 5 years, using a stablecoin pegged to the US dollar would be a good option because the value of my savings would be less likely to fluctuate dramatically over that time period. Where as if I put it in traditional savings, the value will heavily fluctuate and most likely take a nose dive over the stated time period.

Side note: Just after the Terra/Luna crash, I once read somewhere that stablegains i.e stablecoins are neither stable and have no gains.

The Convenience of Digital Savings

One of the perceived benefits of stablecoins is that they can be easily transferred and used for [transactions](https://leofinance.io/@leoglossary/leoglossary-transaction) online. This makes them convenient for saving and spending money in the [digital](https://leofinance.io/@leoglossary/leoglossary-digital) age as native [cryptocurrencies]( https://leofinance.io/@leoglossary/leoglossary-cryptocurrency) tend to fluctuate a lot. They can also be easily converted back into traditional [currencies]( https://leofinance.io/@leoglossary/leoglossary-currency), giving you much flexibility and control over your savings. For example, if you wanted to buy a [Tesla]( https://leofinance.io/@leoglossary/leoglossary-tesla) vehicle with your stablecoin savings, you could easily [convert]( https://leofinance.io/@leoglossary/leoglossary-trade) your stablecoins into USD and use them to purchase the vehicle online.

The Risks of Stablecoins

However, stablecoins do have some drawbacks. One potential [risk](https://leofinance.io/@leoglossary/leoglossary-risk) is that the stability of the [coin](https://leofinance.io/@leoglossary/leoglossary-coin) may be dependent on the stability of the asset it is [pegged](https://leofinance.io/@leoglossary/leoglossary-peg) to. For example, if the USD/[gold]( https://leofinance.io/@leoglossary/leoglossary-gold) were to experience a significant decline in value, the stablecoin pegged to it could also decline in value.

Additionally, stablecoins are not yet widely accepted as a form of payment, which can limit their usefulness and use cases in general.

Despite these drawbacks, stablecoins are gaining in popularity as a way to save money in the digital age. A great example is the Hive Backed Dollar (HBD), which is issued on the Hive blockchain. HBD can be earned through interacting with the blockchain (specifically blogging/microblogging). It can also be bought and sold on the internal market and some exchanges. HBD currently has an APR of 20%, which is way better than what is offered by many traditional financial institutions.

The Future of Savings with Stablecoins

Overall, stablecoins offer a new and potentially better way of saving money in the modern age. They offer the benefits of cryptocurrency, such as fast and cheap transactions, while also providing the stability and security that many people look for when saving for the medium or long term.

While they do come with some risks, they may be a good option for those looking to diversify their savings and take advantage of the convenience and flexibility of digital currencies.

Thanks For Reading!

Profile: [Young Kedar](https://leofinance.io/@young-kedar)

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