Stability in Digital Currencies- Steemit Crypto Academy- S4W5- Homework Post for @awesononso
why Stability is important in Digital currencies
The normal Currency can be used mainly as a means of payment and sort of exchange between people for transaction purpose but it's has another purpose which is a store of value. The same purpose is been asked of the digital currency, to be a form of payment and a store for value. The stability of digital currency is needed for these purposes to be achieved as nobody will be willing to make transaction with a currency Which value can reduce within a short period or to store it's asset as a digital currency if it's not sure of the security of the value of the asset.
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Stability of digital currency will give it edge to be equal with the physical Currency in term of usage, as people will have more believe in it as a form of exchange when it has less volatile. Moreover, the usage of the currency will bring about even a better increase in value as the trust of the user helps even to give the physical Currency hold in value as they are been used as a method of payment.
Do you think CBDCs would be good in the future?
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Central bank digital currencies is a new form of development that I personally love as it will help the local currency to have a form of space in the new form of advancement in technology. It's help the local currency not to the forsaken as the world evolve into the use of digital currency.
As for the future, CBDCs will help to give control of value for good and other commodities in each country, helping the underdeveloped and developing countries with the use of digital currency value used national wide to evaluate the price of good made in an already developed country.
For example, imagine when a USA worker get paid 16$ per hour and a work in Nigeria is been paid 60$ in a month but in the future if the country now decide to evaluate using bitcoin and a USA citizen earn like 0.0001 bitcoin per hour and a nigerian earn 0.001 bitcoin per month., then a USA company produces a bag to sell at 0.002 bitcoin to their citizens this is cheap but to a Nigerian it's very expensive but if the central bank still have a say to give the rate of their local currency in digital world, this problem will be solved.
Weigh the pros and cons in your own understanding and state your position.
The table belows shows the pros and the cons of CBDCs
| No | Pros of CBDCs | Cons of CBDCs |
|---|---|---|
| 1. | It will allow the central to have authority over the financial sector and give money policy with it's country | It will not give room for decentralisation has the currency will be controlled by the governmental body and it's policy |
| 2. | It ensures effective financial system through speed and less error made by third parties for better and faster transaction. | It will reduce the work and income of the local bank because user will tend to take transaction away from them |
| 3. | It reduces cost incurred by the banks that serve as intermediary for transaction and also allow the payment system to work even in rural areas where banks are unavailable | It requires some little amount of know how of technology and power supply on devices for access to your currency. |
| 4. | Since it is a digital currency, it helps the economy to move more towards the use of cashless policy which is a great advantage to the side of the central banks. | |
| 5. | It will increase the nature of the citizens to adoption of other new technology advancement as the government show a part in the present innovation. |
After reviewing both the pros and cons of the CBDCs I wish all countries move in it's direct and create their own digital currency to favour the interest of their economy and to help their own citizens.
how Rebase Tokens work
A Rebase token is one in which it's total volume of token is not fixed but has a fixed price for the total volume in circulation. A Rebase coin is a form of stable coin that adjust its volume to the current price when the Rebase of the token occurs which is in a regular interval.
For example,let's say ITF is a Rebase token with a Rebase time of 24hour and I have 2000 ITF that worth $100 this morning. This means that 1 ITF worth 0.05 currently but if by tomorrow morning 1 ITF worth 0.15 instead of me having 2000 ITF that worth $300 I will only have 666.67 ITF that worth $100.
This is how a Rebase token works which is why they are been referred to as a stable coin as the Value of your asset will neither increase or Decrease but rather the volume will change.
Go to the ampleforth website Check the necessary parameters and calculate the rebase %. What else can you find on the page?
After visiting ampleforth website I got the following parameters, For my Rebase calculation.
Oracle rate = 1.021
Price target =1.061
Formula for Rebase is;
Rebase % = {[(Oracle Rate - Price Target) / Price Target] x 100} / 10
Rebase = {[(1.021 - 1.061) / 1.061] x 100} / 10
= [(-0.04/1.061) x 100] / 10
= (-0.0377x 100) / 10
= -3.77/ 10
Rebase = -0.377%
Other than the oracle rate and the price target we have the time countdown to the next rebase and graph for the price, supply and market cap for the ampleforth token.
Trade some tokens for at least $15 worth of USDT on Binance and explain your steps.
For these trade I will be using 0.0058 Eth which worth $19.95 . I search for the Eth/usdt pair on binance then i input the amount of Eth I am willing to sell. And click on sell. The open order is been filled and I have get my usdt.
Transfer the USDT to another wallet with the Tron Network. From the transaction, what are the pros of the stablecoin over fiat money transactions?
For the usdt transfer I will transfer from my binance to my steemit Tron wallet on my tronlink pro.
To make the transfer, I go to get myusdt wallet address from tronlink pro, then I proceed to withdraw on binance. I inputed the wallet address and the amount I want to withdraw. I then verify my withdrawal using my security method on binance. Below is the screenshot of the transaction.
The pros of stable coin over the fiat money transaction are;
The transaction so not need third person interference hereby giving absolute privacy over the amount and identity of the people involved in the transaction.
The speed of the transaction is not as fast as that of the fiat money transaction
Stable coin can be transferred to anywhere in the world with a fixed fee but so is not the case in fiat money transaction.
Conclusion
Stability in digital currency is a requirement of digital currency to help in the evolution it's want to bring so as to encourage the adoption. As some country has begin to accept the use of Cryptocurrency as a means of payment their central bank also need to get their own CBDCs so as to help their citizens to accept these new form of development. All of these are just means to develop even the financial sector of the country.