Overview
A stablecoin is a cryptocurrency designed to hold a stable value, typically pegged to a fiat currency like the US dollar. It combines the speed of blockchain with the stability of traditional money. Stablecoins are the unit of account for most of DeFi.
How It Works
Stablecoins maintain their peg through different mechanisms: fiat reserves, crypto collateral, or algorithms. Users can mint or redeem the token for its backing asset, and arbitrage keeps the market price near the peg. The design determines its trust and risk profile.
Why It Matters
Stablecoins provide the price stability needed for trading, lending, and payments on-chain. They are the liquidity backbone of DeFi and a bridge between traditional finance and crypto. Their regulation is a growing focus of global policy.
Related Concepts
Stablecoins come in Fiat-Backed, Crypto-Backed, and Algorithmic forms. They interact with Lending, Liquidity Pools, and RWA tokenization.