TOKENS & ASSETS

Stablecoin

Definition

A stablecoin is a cryptocurrency designed to maintain a stable value relative to a reference asset, usually the US Dollar. Stablecoins provide the benefits of crypto (fast, borderless transfers) while minimizing price volatility.

Example

💡 Example

USDC maintains a $1 value backed by dollar reserves, while DAI is decentralized and backed by crypto collateral.

Risks to Consider

⚠️ Risks
  • Depeg risk
  • Centralization
  • Collateral liquidation

Common Questions

What's the difference between centralized and decentralized stablecoins?

Centralized stablecoins like USDC are backed by fiat reserves, while decentralized ones like DAI use crypto collateral and algorithms.

Related Terms

Related Articles

Is stability a necessity for cryptocurrencies mainstream adoption?

When you talk about cryptocurrencies with people unfamiliar with it, the question of volatility is among the first to pop up. Quite often, it’s a low effort way to dismiss the whole world of cryptocurrencies and recent progress made with decentralization. Volatility does not affect all cryptocurrencies: some of them are made to be stable (price wise) — we call them the “stablecoins.” Before we get to that point, let’s state some necessary facts to understand this article:
Is stability a necessity for cryptocurrencies mainstream adoption?

The Maurauder's Map of Decentralized Stablecoins

Wild new stablecoins are constantly appearing, and with the multiplication of chains, layers, and viable stablecoin models the trend is not stopping anytime soon. Navigating the stablecoin landscape is turning into a critical skill for DeFi. While centralized stablecoin models are easier to evaluate, decentralized stablecoins harness various complex mechanisms, making it harder to compare their data face to face. Yet, dozens of relevant new decentralized stablecoins are appearing yearly, and I don’t expect the trend to stop anytime soon.
The Maurauder's Map of Decentralized Stablecoins

The state & future of algorithmic stablecoins

Since the beginning of December, a new trend has been shaping up in DeFi: algorithmic stablecoins. Several projects launched and saw significant growth, attracting even more interest for this subset of the space. Before we dive into what they are and what they entail, let’s first discuss the addressable markets. Stablecoins on Ethereum are massive: they are around 20B USDT circulating, 3.5B USDC & 1B DAI. As you can see, right now most of the volume is served by stablecoins requiring some forms of trust, such as USDC or USDT: the emitting company has the power to freeze assets and manipulate balances.
The state & future of algorithmic stablecoins