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Get to know stablecoins - cryptocurrencies that don't change in value

Khanh Nguyen
Get to know stablecoins - cryptocurrencies that don't change in value

What is a stablecoin? 

A stablecoin is a cryptocurrency that has its value tied to an external “stable” asset, for example, the US dollar. This means one stablecoin is matched to one USD.

Billions of dollars have flowed into stablecoins as they’ve become one of the most popular ways to store and trade value in the crypto ecosystem.

Why are they important?

Stablecoins bridge the worlds of crypto and everyday fiat currency, and allow people to get into DeFi without having to bear the risk of volatility. They have all the powerful features of crypto:

  • Stablecoins are open, global, and accessible to anyone on the internet, 24/7
  • They’re fast, cheap, and secure to transmit
  • (They stay on the Internet and are programmable)

Types of stablecoins

  • Fiat-backed: linked to the value of a specific currency, (eg. 1 USDC = 1 USD)
  • Cryptocurrency-backed: pegged to an established crypto (DAI) 
  • Commodity-backed: 1 Tether Gold = 1 ounce of gold
  • Non-collateralized (algorithmic): algorithms automatically burn or mint new coins based on the fluctuating demand for the stablecoin.(TerraUSD)

What can I do with stablecoins?

  • Earn interest (typically higher than what a bank would offer)
  • Trade or save assets
  • Transfer money cheaply
  • Send internationally

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