What Is First Digital USD (FDUSD)?
The First Digital USD is a stablecoin launched by FD121 Limited, an intermediary based in Hong Kong. The token came into play in June this year. Like any other stablecoin, the price of the token strongly tries to compare and maintain its price within the value of the US dollar. The First Digital Trust Limited manages all the operations regarding the First Digital USD.
At the moment, the FDUSD works in agreement with the Ethereum and BNB (Buy and Burn) tokens. The First Digital Trust Limited plans on expanding its working operations on other blockchains to enhance adaption by other citizens.
How Is FDUSD Necessary?
In payment and other use cases, cryptocurrencies are faster, cheaper, more secure, and more private than fiat currency.
Stablecoins, such as FDUSD, are digital native instruments designed to maintain a stable value, bridging the traditional financial ecosystem and the cryptocurrency market. Stable coins like FDUSD represent fiat currencies in crypto and allow them to move more freely and efficiently.
Where Can I Use FDUSD?
- Using FDUSD for remittances: The FDUSD can be used for performing transactions conveniently across a variety of networks. The FDUSD also has the advantage of lower transaction costs compared to banks.
- Protection against volatility: The holders of the FDUSD can use the token to stabilize themselves whenever there are volatile conditions in the market. If a cryptocurrency holder of any token converts it into the FDUSD stablecoin, he or she stands the chance of facing lower financial risks compared to holders of other tokens.
- Decentralized Finance (DeFi) applications: The FDUSD can also be used in decentralized applications just like any other cryptocurrency. Being a stablecoin enables it to have staking rights and this could help the holders earn a passive income. The holders can also use it to get loans and lend them out at the same time.
- Used in day-to-day international payments: The users can also process their transactions daily using the token. Considering the ticket has lower fees, it becomes exceptionally reliable when carrying out transactions across international borders. The process is also faster by giving the token a bonus.
The Risks Of Using FDUSD
The cryptocurrencies are also associated with high risks and the FDUSD can’t be exempted from the list. Below are some of the disadvantages the token has.
- The risk of regulation: Many cryptocurrencies and cryptocurrency firms worldwide are facing immense pressure from regulatory firms. The FDUSD can also be subject to scrutiny by regulatory firms worldwide if they detect any discrepancies within its uses.
- Operational risks such as fraud can also be a disadvantage to the FDUSD users: The FDUSD operations are dependent on custody services such as crypto wallets which can be attacked at any time if anybody manages to breach into its systems. In case one performs a transaction wrongly while using the FDUSD, it can’t be reversed and this could end up with a lot of losses being made by the holders.
- The de-pegging risk: The pegging operations of the FDUSD depend heavily on the stability of the token and therefore if the stability is compromised, the liquidity and the safety of the coin are at risk of going down.
- Counterparties could also subject the FDUSD token to the compromisation of its stability: Since the FDUSD depends on the use of third-party financial counterparts, there is a chance that counterparty risks could come up. Saving the reputation of the coin can therefore become a challenge since the issuers of the FDUSD rely on the exchanges and other money transmitters to redeem their coin. This could also lead to an increase in the transaction tariffs.
Conclusion
The FDUSD is a token that has many uses and risks at the same time. The value it provides in the cryptocurrency world can’t be taken for granted. Many investors are adapting the stablecoins in their financial brackets and their estimated value is expected to rise as high as trillions of dollars.
The FDUSD holders should be extremely careful when using the token as there are many risks they could face. It is important to conduct research on the background of any cryptocurrency and about stablecoins, it is advisable to look at the reserve reports, audit filings, and the related legal disclaimers. You can easily find these details on the site of the token.