What are the disadvantages of stablecoins?

[Suba]

According to Defillama.com, there are currently over 300 stablecoins circulating in the crypto market, both backed by fiat money and baskets of currencies.

When we enter the crypto market, we will encounter two main types of stablecoins: those backed by fiat money and those backed by commodities like gold, etc. Personally, I believe that a token/coin backed by crypto is not a stablecoin but a wrapped coin, for example, Wrapped BTC, Wrapped Tron, etc.

Stablecoins are beneficial not only for crypto traders and investors but also for the traditional financial world. However, every benefit also has its drawbacks. So, in your opinion, what are the disadvantages of stablecoins?

 

[gwolf666]

While stablecoins offer many advantages, they also present several disadvantages that cannot be overlooked. First, their reliance on a reserve of assets, whether fiat currency or commodities, implies risks to solvency and transparency: if the entity backing the stablecoin does not maintain sufficient reserves or does not audit them reliably, it can generate distrust and stability problems. Furthermore, in some cases, stablecoins may be subject to government regulations that affect their use or even their existence, creating legal uncertainty for users. Another drawback is that, although designed to be stable, in situations of crisis or market fluctuations, some stablecoins have experienced losses in value or have "detached" from their backing, affecting those who hold them. Finally, the centralization of many reserves can contradict the decentralized philosophy of cryptocurrencies, generating risks associated with trust in third parties. In short, while they offer stability and facilitate integration with traditional systems, stablecoins are not without risks that users should consider.

 

[Min George]

The obvious disadvantage of stable coins is that even if you hold it for ten years, it doesn't have any potential to increase in value.

 

[Suba]

The obvious disadvantage of stable coins is that even if you hold it for ten years, it doesn't have any potential to increase in value.

That's right, the value of stablecoins will not increase even if we keep them for a long time. Even the value of fiat currencies as collateral can be eroded by inflation, except for stablecoins pegged to gold.