Stablecoins

Overview

A stablecoin is a type of cryptocurrency created to remain stable in value. Specifically, a stablecoin's value is usually pegged to that of another asset, such as the US dollar. That way, it can maintain a fixed worth. For example, popular stablecoins like Tether (USDT) and USDC were designed so that one token would always equal roughly one US dollar.

Many see stablecoins as a place to park money during times of volatility—whether that's in the crypto markets themselves, or for people living in nations with unstable national currencies.

When stablecoins are pegged to a stable fiat currency like the US dollar, they offer a way to ensure one's funds remain valuable. Although less common, stablecoins can also be pegged to commodities like gold, or even other cryptocurrencies—the stablecoin DAI, for instance, is backed by ethereum.

Notably, stablecoins are actually considered tokens rather than coins. Tokens are built on top of an existing blockchain, rather than running on their own blockchain, the way a coin (like bitcoin) would.

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