Second Generation Stablecoins Propel Next Wave of Crypto Adoption

Following the fluctuations of the 2017 bull market and the subsequent crash in 2018, the blockchain sector has reached a crossroads. A significant barrier to progress is the limited real-world adoption of the technology. While there is substantial institutional interest and billions in value, many proposed applications have not led to widespread implementation. Most cryptocurrency users tend to be traders who move frequently between different digital assets, many of which are utilized primarily for trading rather than practical use. This begs the question: where is the anticipated decentralized token economy?

One major challenge to adoption is stability, or the lack thereof. Money is generally defined by three key characteristics: a unit of account, a store of value, and a medium of exchange. However, due to extreme volatility, most cryptocurrencies primarily fulfill only the role of a medium of exchange. This gap has fueled a rise in stablecoin projects, which are assets pegged to more stable currencies, like the US dollar. Despite the clearer nature of these assets and the significant growth in decentralized finance—$650 million locked in smart contracts, a notable increase from the previous year—many people still lack understanding of stablecoins like Tether and Dai. Additionally, users face numerous obstacles when attempting to engage with blockchain technology.

This article addresses the current state of blockchain adoption and the role of stablecoins in facilitating a more stable digital economy.