A discussion about stablecoins has become pertinent now because Nigerians have witnessed the most spectacular collapse of the Naira in the last few months.
The Nigerian Naira (NGN), the legal tender of the West African country, started 2022 trading against the US dollar at around N500/$1. However, it reached an exorbitant peak of around N900/$1 last week and has settled to a little below N850.
Economic hardship, inflation, and money insecurity are just a few unpleasant dividends this free fall of the Naira has brought upon the nation. And with projections that the currency will plunge to N1000/$1 before Yuletide, there seems to be more cause for alarm.
However, in the wake of these trying times, a solution most Nigerians are not paying significant attention to is stablecoins. A significant percentage of the population remains misinformed about cryptocurrencies and how they work. The truth is that stablecoins can help hedge against the ailing national currency.
What are stablecoins? How do they work, and how can you start saving in them in place of the crumbling Naira? TechNext explains these and more.
What are Stablecoins?
Stablecoins are cryptocurrencies that try to ensure price stability and are tied to a reserve of assets. It may be pegged to a currency like the U.S. dollar or to the price of a commodity such as gold. They are more useful than more-volatile cryptocurrencies as a medium of exchange.
There are many stablecoins, including $USDT, $BUSD, $USDC, and $TUSD. These coins are linked to the value of an underlying asset.
Tether (USDT) is the largest and most widely used stablecoin. The price of Tether is linked to the exchange rate of the US dollar. USD Coin (USDC) is another major stablecoin issued by the American cryptocurrency exchange Coinbase in partnership with Circle. USD Coin is also pegged to the price of the dollar.
Why should Nigerians use Stablecoins?
Using stablecoins brings some great benefits for Nigerians, especially in this precarious time. Since there is no hope regarding Naira’s rise against the US dollar, a reasonable strategy is to start saving in stablecoins like USDT, which is projected to stay strong, rather than keeping money in Naira, which keeps losing value.
The interesting thing is that people don’t have to break the bank. You don’t necessarily need to have millions to save in USDT. You can purchase these stablecoins for as low as N5000 or less on peer-to-peer platforms.
Additionally, stablecoins do not look at national borders. It is just as easy to send a stablecoin transaction to someone abroad as it is domestically. The system is also very transparent because blockchain technology is used. Every transaction is stored on the blockchain and can be viewed by anyone.
How to get started
The easiest way to buy stablecoins is on cryptocurrency exchanges like Binance, Quidax, and others. Binance reported it had added a fiat gateway for the Nigerian Naira to increase crypto adoption and mainstream accessibility.
This means that after a long break due to the February 2021 CBN crypto ban, Nigerians can now deposit NGN from bank accounts and withdraw from their Binance wallets. After depositing this NGN (note that you can deposit as low as N1000), it can be swapped with USDT or any other stablecoin via the NGN/USDT trading pair.
Related post: Here is all you need to know about creating crypto coins
Even if you’re not interested in trading cryptocurrencies, holding USDT against the Naira can be a source of profit. Those who bought USDT when trading at $1/500 have now earned a 65% profit.
And, if things play out according to current realities and projections on Naira before the end of the year, you can make quite a few bucks to ‘detty’ your December just by buying and holding stablecoins!
This content is for informational purposes only and should not be construed as investment, tax or legal advice. It is strongly recommended that every recipient seek appropriate independent professional advice before acting on any information contained herein, as Technext provides no endorsement, opinion or advice, including investment, tax or legal, and makes no representation or warranty about the suitability of a product for a particular reader or circumstance.
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