👀Common Stablecoins Are Facing Problems — Is there a Solution?

Stablecoins are gaining popularity due to their unprecedented development and growing global usage.

While stablecoins are unique in terms of their potential to promote financial inclusion, they also face certain challenges that need to be addressed in order to achieve their full potential.

Besides the challenging adoption of stablecoins, as well as a risk of having too much centralization of a certain stablecoin, among other well-known hurdles, there is one main issue that hunts stablecoins — depeg.

Depegging happens when the value of a stablecoin deviates significantly from its pegged value. It can occur for a variety of reasons, such as issues with liquidity, unforeseen increase or decrease in stablecoin demand, or changes in the underlying collateral.

Due to the difficulties with both fiat-backed and algorithmic stablecoins in recent years, investors have taken precautions and are actively seeking alternatives to diversify their portfolios with other assets, such as overcollateralized stablecoins.