Stablecoin
A cryptocurrency designed to always be worth about $1. It stays stable while other cryptos go up and down in price.
Example
USDC backed by real dollars in a bank, or DAI maintained at $1 through a system of crypto collateral.
Tools & Protocols
⚙️How It Works
- 1
Backing Mechanism
Each stablecoin is backed by dollars, crypto collateral, or algorithms
- 2
Peg Maintenance
Arbitrage traders profit from pushing price back to $1
- 3
Minting/Burning
Supply adjusts as users deposit or withdraw backing
- 4
Redemption
Users can typically redeem for underlying value
📊Key Numbers
$90B+
USDT Market Cap
largest stablecoin
$25B+
USDC Market Cap
most transparent
$130B+
Total Stablecoin
across all types
⚖️Stablecoin Types
| Feature | fiat Backed | crypto Backed | algorithmic |
|---|---|---|---|
| Backing | Real dollars | Crypto collateral | Math/incentives |
| Examples | USDC, USDT | DAI, LUSD | FRAX (partial) |
| Trust Required | Trust issuer | Trust code | Trust mechanism |
| Risk Level | Lower | Medium | Higher |
⚠️Risks & Warnings
- •Fiat-backed: issuer could freeze your coins or be insolvent
- •Crypto-backed: extreme crashes could break the peg
- •Algorithmic: can collapse entirely (see UST/Luna)
- •Regulatory risk as governments target stablecoins
- •Depegging events can cause major losses