What are stablecoins and why are they important for trading?

Stablecoins are a form of cryptocurrency designed to offer price stability. They are typically pegged to a stable asset, fiat currencies, like the US dollar, or commodities, like gold. Digitizing these assets boosts their utility and opens them up to be used within blockchain-based decentralized applications.

Stablecoins, due to their purely digital nature, enable cheaper and faster cross-border transactions. Blockchain-based stablecoin transactions, which are secured by a network of aligned nodes, do not need to go through multiple intermediaries like banks and clearing houses – two peers can simply connect with each other and transfer. 

There are technology fees specific to the blockchain like gas and interoperability, but even with these costs factored in, cross-border transactions are still cheaper and faster than traditional ones. The trading day can now also become 24 hours and trading can happen on weekends.

Accessibility and inclusion. Stablecoins are permissionless. They can offer yield and can be used as a viable medium of exchange for goods and services. These characteristics can be incredibly useful in regions where banking is limited or unavailable.

Blockchain technology offers any financial asset network enhanced security, transparency, and immutability. Transactions cannot be altered retroactively and there is no need to trust a 3rd party like a bank for a transaction.

The inherently digital nature of stablecoins makes them ready-made to be integrated into digital payment, remittance, e-commerce, and online service systems.