Cryptocurrencies are difficult to understand, with a constantly changing monetary value. But what if they carried the same value as the rand?
South Africa’s first stablecoin, a digital currency that has the same value as the rand, launched recently and Rory Mapstone, founder of EOSza – the company behind the stablecoin – wants it to revolutionise the way we pay for things.
eZAR is a digital stablecoin that’s pegged to the rand.
In other words, one eZAR coin (or token) will always be worth R1.
“Stablecoins solve a problem that comes up with bitcoin and other blockchain-based cryptocurrencies.
“If I have a bitcoin, I’m constantly worrying about the price and wanting to sell when it drops and hold on to it if it rises.
“If I have bitcoin, the price may drop between 20-30% in a day and what I could buy yesterday, I can’t buy today,” said Mapstone.
You’ve probably heard of bitcoin and ethereum, the two biggest digital currencies in the world. At the time of writing, bitcoin traded at R158419 per one bitcoin, while ethereum traded at R3382 per coin.
The price of the bitcoin you own might differ completely from one week to the next, or even from the time you go to bed until you wake up in the morning. This kind of short-term volatility makes bitcoin and other popular cryptocurrencies unsuitable for everyday transactions such as paying for goods and services.
People use and trust fiat money like the rand or the dollar because they know that what they can buy with $1 today, they will still be able to buy with $1 tomorrow.
Mapstone said people could buy eZAR already and hold it in the CoolX mobile wallet app developed by EOSza.
He said while it made sense to just use normal money over the digital currency, he wanted people to use eZAR for the technology behind the coin.
“If stablecoins are functioning so similar to fiat currency, why isn’t it better to just use normal cash?
“Simply put, stablecoins exist so that users can benefit from the characteristics of blockchain-based digital currencies, including low transaction costs and instantaneous payments without the need of a centralised middleman like a bank.”
As the owner of digital money, you are your own bank. No coins can be removed from your digital wallet unless you manually transfer them to another wallet. Payments can also not be arbitrarily reversed by the sender or counterfeited, which makes digital payments inherently safer than traditional bank payments.