The introduction of blockchain technology and bitcoin is the start of an entirely new era in electronic payment. There are over 6000 cryptos that have all paved the way for an innovative electronic payment system that works on a distributed network without intermediaries. Due to their unique capabilities and their permissionless nature, cryptocurrencies are proving extremely popular in a variety of sectors, such as healthcare, finance, retail and supply chain, and much more.
However, the use of cryptocurrency within the world of payment has been hampered by the volatility of cryptocurrencies. In this context blockchain, advocates continue to propose a more effective method to deal with the current problems. One of the most popular approaches is to use Stablecoins tied to the worth of the asset that is used as an underlying which is typically US dollars. Stablecoins are comparatively new. Therefore, the majority of people are at a loss about the concept.
What is Stablecoin?
A Stablecoin is a digital currency that is linked to an asset that has an unstable price like gold, the US Dollar, or Gold. When compared with cryptocurrencies Stablecoins are able to solve the issues of volatility. It's since cryptocurrencies have a small market capitalization, and tend to be subject to fluctuations and fluctuation in daily orders for buy and sell. This is why Stablecoins is the most appropriate digital currency that can be used for all kinds of transactions, from everyday commerce transactions on e-commerce to cryptocurrency token exchanges that are based on blockchains.
Stablecoins can be described as tokens of fiat currencies or real-world currency. In simpler terms that if 1USDT (Tether) equals 1 USD, Stablecoin is expected to keep this peg in spite of market fluctuations. The stablecoins consist of four kinds of stablecoins: Fiat-backed stablecoins; precious metal-backed stablecoins, algorithmic stability coins. To know more about stablecoins, take a look at our in-depth analysis.
What is Cross-chain Technology?
Cross-chain technology is an emerging technology that improves the interoperability of blockchains that are independent. Each blockchain has been designed and built to take specific actions in order to overcome the weaknesses of existing blockchains. For instance, bitcoin was developed to replace traditional currencies with digital currency. While Ethereum came up with smart contracts to facilitate the use of blockchain technology across Fintech industries. Because of the lack of interoperability, and the siloed characteristics of Bitcoin and Ethereum users are unable to share data between these two blockchains.
The great thing about blockchains is that they're distinct, yet they share the same infrastructures and basic components which is where cross-chain technology comes into play. With the rapid growth of blockchain networks as well as the continual announcement of new blockchain projects, cross-chain interoperability is vital. This allows blockchain ecosystems to be in contact with one another, regardless of separate chains. With this technology, blockchains can exchange information and data, tokens, and, perhaps most important, Stablecoins between diverse blockchain networks.
Technologies such as Cross-chain swap, cross-chain token exchanges, as well as the token bridge that is decentralized are great examples of how cross-chain-powered innovations have helped bridge the gap between blockchain and practical applications. By improving the interoperability of blockchain cross-chain helps preserve the decentralized nature of blockchain and opens up numerous opportunities for use across different sectors.
What are Cross-chain Stablecoin Payments?
Cross-chain Stablecoin payment is similar to the cross-chain cryptocurrency exchange. Particularly with regard to Stablecoin cross-chain technology, cross-chain technology allows two blockchains that are inherently different to communicate with one another to share Stablecoins or for making payments using Stablecoins. For example, Mike on Ethereum blockchain is looking to transfer Tether to Jack on the Binance Smart Chain. In exchange, Mike is entitled to receive Binance USD from Jack. Because BSC, as well as Ethereum, are two blockchains that are distinct and cannot permit blockchains to exchange Stablecoins. Cross-chain technology is introduced to address this issue of interoperability. It secures connections between the two blockchains and allows for instant exchange of Stablecoin.
The Cross-chain technology allows Stablecoin payments can bring a variety of advantages to issuers. The Stablecoins can be used to mint or purchase back coins, and redeem remaining Stablecoins at any time. With the capability to swiftly transform unstable assets to Stablecoins it is possible to stay away from the volatility of the crypto market. Additionally, the first and second-generation blockchains, such as Bitcoin and Ethereum are unable to effectively support transactions in everyday use because of their limited computing power and comparatively expensive fees. In the end, customers prefer the flexibility to choose the blockchain that best meets their everyday payments and settlement needs. Their search is over with crossing-chain Stablecoin payment options, where transactions can be made with any Stablecoins without the need for brainstorming strategies.
Why Do We Need Cross-chain Stablecoin Payments?
A decentralized peer-to-peer payment system is among the most frequently used applications using blockchain technologies. The goal was to eliminate any third-party companies from the payment process and permit individuals from all over the world to be part of a secure distributed network. Additionally, it is worth noting that at first, blockchain appeared to facilitate cryptocurrency transactions. However, the growing popularity of alternate currencies like Stablecoins as well as the rapid growth in their use has prompted numerous organizations (banks as well as banks or financial organizations) to issue Stablecoins to facilitate block-based payments.
Like crypto tokens, Stablecoins are also traded on different blockchains which are not connected to one another. Prior to the introduction of cross-chain technologies, the transfer of Stablecoins across blockchains was made possible through an entity that was centralized or a middleman. The first step is to transfer their Stablecoins to the middleman. This method of transferring the custody of the money to a middleman is against the fundamental principle of permissionless centralization within Blockchain. Therefore, stable cross-chain payments remove the need for intermediaries to facilitate the transfer or exchange of Stablecoins on peer-to-peer payment platforms.
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