You have probably heard of how AI has penetrated the crypto industry, stablecoins, for instance. According to a recent report by Circle, stablecoins will likely be the future of global mainstream payment. This, of course, might be influenced by AI’s integration into the industry. So, how has AI changed the stablecoin industry in 2024?
Well, you can actually agree that the crypto industry is ever-changing, and staying up to date helps you to make informed decisions. For instance, you may want to check how XMR to USD prices vary from time to time before making any investment decisions. Such are some of the changes shaping the crypto industry, but in this article, we will focus on the impact of AI and other amazing details.
Stablecoin development
Just recently, stablecoin company Ampleforth began collaborating with Asymmetry Finance to use its algorithmic adjustment methods to develop new stablecoins like afUSD.
Ampleforth has partnered with Paid Network and Asymmetry Finance to create afUSD, a synthetic dollar protocol that leverages the AMPL elastic supply mechanism. As the spokesman of Asymmetry told CoinTelegraph, afUSD aims to maintain high sustainable profits by using Ampleforth’s adjustment protocols to improve scalability and overall durability. This is by influencing the token supply to hit a certain price.
In the discussion, Asymmetry also highlighted that their afUSD system was actually more secure and scalable than other similar coins like Ethena’s USDe.
For those who do not know, AMPL is an algorithmic asset of Ampleforth, which actually uses artificial intelligence to adjust its AMPL token supply protocol.
Asymmetry’s afUSD is just one of many stablecoins that are turning to algorithmic functions to maintain stability and improve overall quality.
Stablecoin and AI collaborations
If you have been keeping a close watch on the crypto industry, you must be aware of the volatility of these digital currencies. And since stablecoins are linked to them, they can be quite exposed to the same challenge. With artificial intelligence, suppliers are now thinking of new ways to ensure we do not experience the same volatility issues. Traditional stablecoins like Tether, which previously relied on collateral, are now making moves towards creating algorithmic stablecoins.
Towards early this year (2024), Tether announced its plans to develop AI models that would be integrated into its products to tackle real-world challenges. This was after the stablecoin issuer signed a $427 million deal with Nvidia Company Northern Data in late 2023 to generate chips for cloud computation.
If you are thinking that is all, you might actually be wrong. Have you heard of Basis Cash? This token boasts a three-token system that cleverly applies artificial intelligence algorithms to ensure stability. With such tokens already storming the market, will this be the future? Well, let’s keep watching.
Managing assets through AI
According to Peter Wood, CTO at Spectrum Search, stablecoin suppliers have leveraged artificial intelligence to improve price stability by using real-time data and machine learning to adjust their supply to adhere to the pegs.
FRAX stablecoin is just a perfect example. Using two algorithmic market operations, Fraxland and Curve, FRAX has created an asset protocol, Fraxswap – which uses Uniswap V2 protocol systems to help stabilize the price of Frax Finance’s stablecoins, FRAX and FPI.
This protocol, which has an embedded time weight average market marker (TWAMM), allows traders to swap tokens in the same pool, thus increasing the stability of FRAX pegs and returning protocols’ excess profits to FXS owners. CoinGecko also highlights that Frax Finance claims that protocols like Fraxswap can stabilize the pricing of assets using collateral assets over long periods of time.
The future of stablecoin development
The future of digital currencies is likely to be stablecoins – more mainstream payment companies like PayPal have ventured into the stablecoin market after launching PayPal USD. According to Cointelegraph, PayPal USD’s market capitalization has already exceeded $1 billion.
Ripple has also pledged to launch its stablecoin RLUSD, with lab testing commencing for the USD-pegged stablecoin. According to the Financial Times, Stripe announced that it will also begin accepting USDC stablecoin for transactions.
As stablecoins expand into mainstream payment, giant suppliers like Tether are also actually gearing up to move to the next level. The stablecoin company recently announced plans to develop a UAE dirham-pegged stablecoin.
How can we end this discussion without looking at how things have been recently? According to B2binpay, as of May 2024, over 27.5 million users were actively engaged in stablecoins. Rise Works highlighted that the total stablecoin market cap reached an estimated $165.93 billion as of July 2024, showing steady growth. CoinEdition says that the stablecoin market has experienced a monthly growth of 3% in 2024, which is influenced by the coins’ adoption and transaction volume.
Final remarks
Well, as you can see, integrating AI into stablecoin has tremendously changed the industry through stablecoin development, increased stability and asset management. We have also seen how AI capabilities encouraged collaborations and partnerships between stablecoin suppliers and AI companies like Tether Operations Limited and Northern Data.
Is it actually still too soon to make proper predictions regarding stablecoins and artificial intelligence? In an advancing market, there is every reason for you to presume that stables will continue to benefit if issuers continue to maximumly use AI.
