Note: this is a series of articles written by CanWork Freelancers.
This article was written by Noah Elijah, a freelance content writer. Noah has completed 15 jobs on the CanWork platform.
Here is a link to his profile: https://app.canwork.io/profile/noah-elijah
Title graphic by Ray Armas.
BUSD - Everything You Need To Know About CanWork's Settlement Currency
With the increase in crypto adoption, cryptocurrency payment for freelancers is now an option. CanWork continues to take a pragmatic approach to ensure that the marketplace's settlement model for remote workers is secure, simple, and fair.
This article explains how and why BUSD settlement currency helps protect CanWork’s payment model.
What is BUSD?
BUSD, or Binance USD, is a stablecoin – a type of cryptocurrency designed to maintain a stable value relative to a specific asset or basket of assets. In the case of BUSD, the asset is pegged to the US dollar.
This means that BUSD is designed to maintain a value of roughly 1:1 with the US dollar. Such that 1 BUSD is worth approximately the same as 1 US dollar.
BUSD is issued by the
Binance cryptocurrency exchange and is backed by real US dollars held in reserve by Paxos. Paxos is a financial services company specializing in issuing & managing stablecoins. BUSD can be purchased & redeemed on the Binance exchange, throughout the Binance ecosystem and broadly across the cryptocurrency ecosystem.
Other notable stablecoins include Tether USD (USDT), USD Coin (USDC), True USD (TUSD), Pax Dollar (USDP), USDD, and more.
How does CanWork’s Escrow Payment Settlement Work?
To facilitate secure, simple, and transparent payment services, CanWork developed a new, custom-built
escrow system. The escrow system follows a carefully preset smart-contract algorithm that provides a level-playing ground for clients and freelancers using the CanWork marketplace.
The CanWork mechanism developed for protecting every client-freelancer transaction is pretty straightforward.
When a client decides to hire a freelancer, they’ll be required to make an upfront payment using $BNB or any of the acceptable BNB Smart Chain (BSC) assets. The smart-contract detects the escrow transaction, then locks the asset's value in the BUSD stablecoin to protect it against price volatility. It also keeps it secure throughout the duration of the job.
Once the job is complete and the client is satisfied, the escrow system releases funds after receiving the signal from the client's end. The freelancer receives BUSD into their crypto wallet in the exact equivalent of the deposited asset at the time the job was accepted.
The CanWork Smart Contract; Providing a Hedge Against Price Volatility
How and when does the swap from BNB and other BSC token assets to BUSD stablecoin happen? That is where market liquidity comes in. CanWork's smart-contract works in tandem with
PancakeSwap and Binance Smart Chain to perform these three core functions:
- Facilitate instant and automatic token swap,
- Lock assets value via BUSD,
- Hold the asset and thus protects the job value from price volatility.
- Settle payments to the freelancer in a stablecoin (BUSD)
PancakeSwap is a BSC-based decentralized exchange that works on the automated market maker (AMM) model instead of the traditional market model. This means some traders have placed their assets in the liquidity pool to earn rewards and arbitrage asset prices. This method ensures that sufficient tradeable or swappable assets are kept in the pool.
To ensure the highest quality experience & exchange rates, CanWork only approves tokens with the highest liquidity in the BSC ecosystem for payment.
Why BUSD Payment is superior in a marketplace context
There are several benefits to using BUSD stablecoin for payment settlement compared to other cryptocurrencies. Here, we highlight some of them:
Stability: Protection against Price Volatility
Even if you're new to crypto, you're most likely aware of how quickly asset prices can fluctuate. The market condition makes it extremely difficult to maintain a balanced, uncomplicated, and fair transaction between a client and a freelancer.
Consider a scenario:
Tom is a client and decides to hire Carl, a freelancer on CanWork. Tom and Carl agreed on a week-long job worth $1000.
Tom decides to deposit the job amount into the escrow using $BNB. At the time of deposit, the price of 1 BNB is $300. That means Tom deposited approximately 3.333 BNB into the escrow.
A week later, the price of BNB dropped drastically to $245. Carl received 3.333 BNB but is now worth $816.5. Carl is at a loss.
The scenario above turned out to be an unpleasant experience for Carl. This is one of the primary reasons why stablecoins like BUSD are created – to serve as a mechanism that hedges against the high volatility of cryptocurrency markets. BUSD is designed to maintain a stable value relative to the US dollar asset. This makes it a more stable and predictable form of payment than other native cryptocurrencies such as BNB and other coins.
One can argue that Carl could as well have taken advantage of the market if the price of BNB goes in the uptrend direction. Even at that, this is not a reliable metric for a simple and fair transaction between both parties.
BUSD is widely accepted
You do not have to worry about spending your BUSD. It is available to trade on over 40 major exchanges and has many popular use cases. Also, many merchants and online platforms accept BUSD stablecoins as a form of payment, making them more widely accepted than some other cryptocurrencies.
It is easy to convert & trade
You can easily convert your BUSD into any other major cryptocurrency or fiat currency of your country. This makes it a flexible payment/settlement option for a global freelancing marketplace in the 21st century.
Easy to understand
Estimating the value of a cryptocurrency when it is divided into smaller units, especially for someone with little knowledge of cryptocurrency, may be confusing. Unlike other cryptos, BUSD is pegged to maintain a 1:1 with the US dollar. Thus, it is easy to understand how it works since 1 BUSD = 1 USD.
Lower Risk
Because BUSD is backed by the US dollar asset; it carries a lower risk than other cryptocurrencies, which may not be supported by any assets. BUSD is also a fully regulated stablecoin by the New York State Department of Financial Services (NYDFS), with all its reserves held 100% in cash and cash equivalents. This means that customers' funds are always available for 1:1 redemption.
Less Fees
One of the perks of using BUSD is that you can enjoy ridiculously low fees on your transactions. Getting paid in BUSD on CanWork attracts zero fees or commissions.
In Conclusion
BUSD is one of the few stablecoins that are highly regulated and provide a reliable means for a crypto transaction. In addition, it is very accessible and can be used as a hedge to protect against price fluctuations within the CanWork marketplace.
Note: this is a series of articles written by CanWork Freelancers.
This article was written by Noah Elijah, a freelance content writer. Noah has completed 15 jobs on the CanWork platform.
Here is a link to his profile:
https://canwork.io/profile/noah-elijah
Title graphic by Ray Armas.
