Bitcoin celebrated its 10th anniversary a year ago, but it’s yet to take over the world as a revolutionary digital legal tender—like how it intended to be. There have been a few small nations, like El Salvador, that dared to transact with BTC, but for the most part, the rest of the globe is still hung up on the more reliable fiat money.
Volatility is the archenemy of speculation, and that’s all the more evident in the unstable nature of cryptocurrency, which gains and loses value through peer-to-peer consensus. A tingle of certainty from the latest crypto news can mean a $10,000 increase in prices overnight. Likewise, one influential figure pulling out of the ecosystem can mean a bloody panic sell-off among investors.
Stablecoins exist as mediators between the crypto and fiat realms. They take the best of both worlds, from the stability of physical currency by being pegged to assets representing this value while retaining an all-digital, blockchain-based, and tokenised identity. For most investors, stablecoins play the crucial role of acting as “placeholder” assets, allowing them to stay within the crypto ecosystem despite fears of volatility.
However, stablecoins never took off as an alternative to fiat for various reasons. As a result, it became pertinent to elevate the idea of stablecoins by making them even more reliable, easier to use, and future-proof. Enter anchored coins: the mega-evolution to stablecoins that are revolutionising the digital financial ecosystem.
Article Breakdown
The Problem With Stablecoins
While stablecoins are crucial in maintaining balance in the cryptocurrency industry, they naturally also come with plenty of flaws that make them unusable for day-to-day transactions.
First, it’s important to know that each stablecoin is pegged to an external pool of funds, consisting of anything from fiat money, investments, and even cryptocurrency. However, most of the time, there’s no clear guarantee of what these assets are and whether or not every coin is accounted for in the reserve pool.
Tether (USDT), one of the most popular stablecoins at #3 in the crypto market cap, came under fire a couple of years ago after it was proven that the company didn’t have enough USD reserves to back the coins in circulation. They have since changed their claim—they’re now backed by various assets rather than just USD. However, the same issue runs rampant across the industry, making it hard for stablecoins to gain investors’ trust.
Stablecoins that don’t disclose the exact assets that back each coin can deceive investors, who have no way of telling whether or not the reserve pool has the capacity of backing every single coin in circulation. Moreover, new investors who don’t understand what’s happening behind the scenes can find it difficult to tell exactly how much is being held by the creators and how many coins are available in exchanges for purchase. This often creates a false sense of security and makes it difficult to trust stablecoins for use at a large scale.
Experimental Stablecoins: Making Reliable Assets Unreliable
Over the years, stablecoins have become more experimental, and now there exist derivatives that are backed not by fiat reserves but by other cryptocurrencies. In theory, it’s a good idea because it supports a diverse token economy. Still, the result is an incredibly unstable foothold that can cause volatility to occur in a supposedly stable asset.
An example would be the Iron Titanium Token (TITAN), which makes up 75% of the reserve pool for the stablecoin IRON, and its recent fall to $0 after the panic-selling bug hit investors—including Mark Cuban. As a result, IRON has fallen off its $1 peg at just $0.7, proving how this reserve strategy may not work in a highly speculative market.
How Anchored Coins Revolutionise Stability
Anchored coins like The People’s Reserve revolutionise stability by adding another layer to ensure that the coin retains a value that would never go down, regardless of what happens to its pegged fiat asset. For instance, TPR is anchored to the last highest price of gold. This anchor point dictates the value of TPR but has nothing to do with its fiat backing, which is a reserve of USD. Essentially, there are two separate factors at play: the anchor point and the fiat reserve.
Say the price of gold sees an all-time high of $2,000, creating an anchor point for TPR to latch onto. But due to an unprecedented increase in gold’s supply, its price drops to $1,900. Even if the anchored asset—gold—goes down, TPR will not, as it’s pegged to the last highest price of gold. If gold reaches another all-time high—for instance, $2,500—then TPR will latch itself onto that new value point.
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All the while, TPR is also backed by a fiat reserve of USD, which creates stability without influencing the coin’s price. Even if the USD were to crumble, TPR won’t, as it’s algorithmically pegged to a different asset: gold.
Creating Investment Value
Cryptocurrency strayed from its goal of being a currency for the people as it began its campaign in taking over the world of speculative investments. Bitcoin has reigned as the best asset class of the past three years, beating gold, mutual funds, and other popular traditional investment options, pioneering a world of digital wealth. As a result, crypto has entered the mainstream conscience as an asset that will eventually grow value over time. And through decentralised participation, users can help validate transactions on the network through mining, staking, and more.
That puts stablecoins at a major disadvantage—they can’t grow value over time. Due to being locked into a fiat peg that only moves in minor adjustments, there’s no way to accumulate wealth through “investing” in these stable digital currencies. To a certain degree, stablecoins become less attractive than fiat money, gaining interest through high-yield savings accounts offered by banks.
Anchored coins solve that issue through automated staking, which is essentially a process wherein TPR held in a dedicated wallet application help validate transactions on the network without any technological effort on the investors’ end. Like a savings account, funds grow over time at 12% APY—calculated daily to account for changes in the wallet’s balance. This method enables the free use of TPR in day-to-day transactions, as it doesn’t lock coins into the system—unlike traditional staking.
Anchored coins elevate stablecoins by taking all its best features and solving its worst problems, paving a new path toward useable and realistic mainstream cryptocurrency adoption—while also giving investors the leverage to earn substantial passive income. The People’s Reserve is one of the pioneers of this revolutionary technology, which is expected to continue evolving along with the crypto landscape.