Stablecoin
A crypto token designed to hold a steady value, almost always pegged one-to-one with the US dollar.
Stablecoins solve a basic problem: crypto is too volatile to price a coffee or park profits in. A stablecoin aims to hold $1. The two largest, Tether (USDT) and USD Coin (USDC), are backed by reserves of cash and short-term government debt, redeemable in theory one-for-one. Together they anchor most crypto trading pairs.
Backing models differ, and so does the risk. Fiat-backed coins depend on the issuer actually holding the reserves it claims. Crypto-collateralized coins like DAI over-collateralize with other assets. Algorithmic designs, which lean on code and incentives instead of reserves, have the worst track record — TerraUSD collapsed in 2022 and erased tens of billions.
Related terms
A stablecoin that holds its peg through code and market incentives rather than holding cash reserves — a fragile design.
DepegWhen an asset meant to track a fixed value, like a stablecoin's $1, slips away and won't snap back.
TokenA digital asset issued on top of an existing blockchain, usually through a smart contract rather than its own network.
DeFi (Decentralized Finance)Financial services run by code on public blockchains, letting people trade or borrow without a bank.