Stablecoins are digital assets that are designed to minimize the impact of volatility on the crypto market. These assets are much more stable than conventional cryptocurrencies while simultaneously retaining all the advantages of the latter. This makes stablecoins an ideal tool for fundraising. We invite you to explore why stablecoins and charities fit well together and how to start accepting stable cryptocurrencies in a matter of minutes.
- Stablecoins are an excellent tool that has all the advantages of cryptocurrencies while eliminating their disadvantage — volatility.
- Depending on the pegging mechanism, there are three categories of stablecoins.
- NOWPayments provides an opportunity to start accepting stablecoin donations in a few clicks.
Stablecoins differ from traditional cryptocurrencies in that they have a low level of volatility while at the same time providing all the advantages inherent in the latter. For example, they retain such benefits as:
In the case of charity, every minute has weight. Stablecoins allow you to fundraise the necessary amount in the shortest possible time without the risk of sudden drops in the exchange rate. Just like with cryptocurrencies, no bank is able to freeze or reject a payment. In addition, international transactions of stablecoins allow you to transfer a fiat pegged sum in a matter of minutes.
At this point, I would like to cover several points at once. Firstly, there is no risk that the $100 transferred today will turn into $50 tomorrow. Secondly, there is no need to provide sensitive data to accept crypto donations. Thus, charitable foundations can eliminate the risk of account hacking and loss of collected funds.
Stablecoin transactions are transparent and traceable. This allows for creating a trusting environment between donors and charitable organizations. Thus, the donor knows to whom and for what the funds were donated.
Stablecoins can be used to preserve value for a long period of time. This is because such assets are provided with real value, which makes it possible to use them as a reliable investment tool without fear that the currency will lose its value at any moment.
Not every donor wants to make his good deeds public, but it is simply impossible to maintain privacy in the case of bank transactions. Banks know everything about us: name, age, address, transaction history, and so on. In the case of crypto donations, you are not required to share personal data. The same applies to stablecoins.
The number of crypto donations is growing every day; according to the report of The Giving Block, more than $69 million of crypto donations were collected in 2021. However, crypto donations still take up a meager percentage of the total. The reason for this is largely the volatile nature that repels both non-commercial organizations and donors. Stablecoins are able to solve this problem, allowing you to make donations quickly and efficiently regardless of location.
Types of stablecoins
The most common type of stablecoins. The issuing companies keep a fiat amount similar to the number of issued stablecoins on their bank accounts or with third-party custodians. Each stablecoin is tied to one unit of the fiat currency 1 to 1. If the price of the stablecoin deviates from the fiat rate, it is stabilized by the traders themselves. Arbitrageurs convert fiat into stablecoin if the price exceeds the exchange rate and sell at an increased price, increasing the demand for stablecoin and thereby stabilizing the price. And vice versa.
The scheme is similar to the previous one, but cryptocurrency is used as collateral. The problem of high volatility is solved by creating a reserve capital with a multiplicity of at least two. This will allow you to keep the rate when the price drops. Crypto-backed stablecoins are functioning based on smart contracts, which makes them more secure and reliable. To purchase an asset, you need to request the required amount and transfer the equivalent to the collateral in the required ratio.
These stablecoins are not backed by either fiat or cryptocurrency. A stable exchange rate is provided by algorithms and smart contracts. If it is needed to lower the rate, an algorithm issues coins to increase — burn or buy back some of them. That is, an excess or deficit is created, and supply and demand are regulated.
Examples: UST, FEI, FRAX.
Using stablecoins for charities
The advantages of stablecoins listed earlier make them an effective and reliable financial instrument. So, stablecoins can be used for various purposes:
- Donations. Stablecoins are a kind of digital analog of fiat funds. With one note, stablecoin transactions are fast, cost-effective, transparent, and secure. In addition, stablecoins have an essential criterion vital for effective fundraising — they are borderless.
- Payrolls within non-profit organizations. International payments are a sore topic for traditional financial infrastructures. Thus, when paying salaries to foreign workers, non-profit organizations spend a huge fee for conducting a cross-border transfer. With stablecoins, fees remain low, thereby ensuring that more funds go to help those in need.
- Payments to those in need. Besides, that stablecoin transactions are borderless, fast, and cheap, there is another significant benefit. No one can freeze or cancel a transaction, leaving those in need in trouble. This characteristic is perhaps the main reason why the use of stablecoins is crucial for the charity sector.
How to accept stablecoins as donations?
NOWPayments provides an opportunity to accept major stablecoins as a donation. Our service is non-custodial, so you can receive funds directly to your fundraising wallet. In addition, we are proud of our low fees, which start from 0.4%. In order to start accepting stablecoins for your good cause, use one of the tools:
You can place a donation widget on your website in a matter of minutes. Simply embed the donation widget with your API key, and your donors will be able to donate a stablecoin without even leaving the page. Navigate to the “Coin Settings” section in your account and select the stablecoins that you want to accept.
You can add our donation button to your website, fundraising blog, forum, or anywhere. In addition, we provide two types of buttons to fit into the design of your platform.
The easiest way by which you can start accepting stablecoin donations on 1-2-3 is with a donation link. Just share the link and receive donations directly to your wallet.
The digital world is developing and transforming under the influence of various factors. Stablecoins occupy a special place in the ecosystem of decentralized assets. They serve as a kind of symbiosis between cryptocurrencies and fiat money. Due to the binding to the exchange rate of traditional money, stablecoins are a perfect replacement for the latter, which allows them to be used for safe, transparent, and effective fundraising.