The price volatility of cryptocurrencies is a major blocker for mass adoption. Their rapid change in fiat-denominated value causes payment values to vary even during settlement times, being highly inconvenient to merchants that handle them.
Stablecoins are cryptocurrencies with an exchange rate peg with existing fiat currencies (such as the United States dollar) or a fiat-related index, thereby drastically increasing their usefulness as a payment medium.
Algorithmic Central Banks
Although there exists a wide variety of stablecoin mechanisms, Basis Cash specifically uses an “algorithmic central bank” approach to manage the supply of tokens according to a predetermined logic. The algorithm is in charge of balancing stablecoin supply to fluctuating demand, ensuring that the token price remains relatively stable. Further details are available under the Mechanisms section.