The volatile nature of cryptocurrencies makes people wary of adopting them.
Vow Currency comes as a breath of fresh air for traders, investors, consumers, and businesses. They may prove to be viable alternatives to centrally issued stablecoins.
Cryptocurrency has gained tremendous momentum with millions of people getting into “crypto” with each passing year. The primary reason behind such a massive surge is the potential financial windfall people can gain by holding and trading them. Other advantages such as fair and secure transaction mechanisms, zero interference from any central authority provide meat on the bone.
However, one aspect that has made consumers wary of cryptocurrencies, is their volatility. Stablecoins arose to reduce this volatility, but they come with their own set of problems. Vow is leading the charge on a new approach to stable value currencies. It is using the loyalty industry to distribute a new type of stable currency into circulation, one which is backed by thousands of independent businesses rather than fiat in a bank account. It delivers an entire ecosystem, benefiting customers, merchants, and any participating loyalty organizations who vow (promise) to accept Vow’s country-specific tokens called Vow Currencies at 1:1 with local fiat currency.
Understanding Crypto Currency and Stablecoins
One can easily get confused between cryptocurrencies, and stablecoins, as these are closely associated with one another. This will also help you make an informed decision on why Vow Currency offers a better alternative to stablecoins. Here’s a quick look at what these terms mean.
- Cryptocurrency is a virtual currency that uses encryption and cryptographic techniques to secure and authenticate transactions held on a blockchain network. In simple words, they are decentralized virtual currencies. There are over 10k different currencies typically with a floating value that changes according to supply and demand pressures.
- Stablecoins are a special type of cryptocurrency linked to an underlying asset such as gold or a national currency that remains relatively stable against market volatility. Stablecoins backed by fiat currencies are known as fiat-backed stablecoins, whereas algorithmic stablecoins incentivize stability with cryptographic rewards. Stablecoins supported by commodities like gold or oil are commodity-backed stablecoins.
Problems Associated with Centrally Issued Stablecoins
Though many stablecoins have the backing of fiat currencies or commodities, they have their limitations. They necessitate sufficient collateral to be held by the issuer, which brings a third party back into crypto transactions and hence reintroduces the risk of central party failure. In theory, the value of each stablecoin is less volatile because it is pegged to an asset like the U.S. dollar or gold.
What Sets Vow Currency Apart From Other Cryptocurrencies!
The prime benefit of Vow Currency is that it allows issuers to create liquidity without incurring any debt. What is backing the circulating supply? Each participating merchant makes a promise (vow) to accept any currency it issues, against its future goods or services.
Besides promising to accept back the Vow Currency they have issued, businesses stake 20% of the issuance value in Vow. In essence, making each Vow Currency 120% collateralized. 100% by goods and services and an additional 20% with Vow.
Vow Currencies: The Best Alternative To Centrally Issued Stablecoins
Compared to centrally issued stablecoins, Vow Currencies tokens can prove to be the best alternative for the following reasons.
No Volatility
Vow Currency is backed by demand for the goods and services of the accepting merchants. Because of this, it tracks perfectly with the value of the domestic currency. It is not possible for a unit of v$ to diverge away from parity to the USD when spent at a participating ecosystem merchant.
Replace fiat currency
In order to issue Vow Currency, merchants who wish to reward their customers must stake some VOW. The act of staking Vow, mints Vow Currency which each participating merchant can distribute to its customers, replacing cash in its current “cashback” programmes and leading to substantial savings.
As Vow Currency gains momentum, the merchants issuing them must purchase more VOW tokens. Over time, the expansion of the merchant portfolio will constrict the circulating supply of Vow tokens, putting positive pressure on its price.
Anti-inflationary
Centrally-issued currency technically has no limitation on its supply. If there is political will, then issuance can commence, debt ceilings can be raised, and the show goes on. In the VOW ecosystem, the staking requirement serves as a limitation on the amount of Vow Currency distributed.
Final Words
Cryptocurrencies are on their way to become more widely accepted and mainstream as more and more countries extend support to blockchain technology. The inherent advantages of secure transactions and independence from central authorities are compelling reasons for consumers and businesses to shift towards cryptocurrency adoption. Vow’s ecosystem is supported by demand for the utility that Vow Currency provides, ensuring long-term sustainability.
By facilitating the issuance of Vow Currencies, Vow addresses significant drawbacks of cryptocurrencies and presents a better alternative to centrally issued stablecoins.
We are currently having our pre-sale of VOW tokens and you can visit our website to Join.
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