Stablecoins

Extracted Attributes

• Type

  Cryptocurrency

• Benefit

  Global access to financial services

• Purpose

  Maintain stable value

• Challenge

  Investor losses due to failures

• Mechanism

  Backed by reserves or algorithmic formulas

• Primary Networks

  Ethereum, Tron

• Regulatory Status

  Becoming regulated in many jurisdictions

• Collateral Structures

  Fiat-backed, Crypto-backed, Commodity-backed, Algorithmic

Stablecoin

A stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities (such as precious metals or industrial metals), or another cryptocurrency. In theory, 1:1 backing by a reference asset could make a stablecoin value track the value of the peg and not be subject to the radical changes in value common in the market for many digital assets. In practice, stablecoin issuers have yet to be proven to maintain adequate reserves to support a stable value, and there have been a number of failures with investors losing the entirety of the (fiat currency) value of their holdings.

Web Search Results

• Stablecoins: Definition, How They Work, and Types - Investopedia

  Stablecoins are cryptocurrencies with a peg to other assets, such as fiat currency or commodities held in reserve. The intent behind them is to create a crypto asset with much lower price volatility, which makes them better for use in transactions. Stablecoins have become or are becoming regulated in many jurisdictions because of the instabilities and losses that have occurred in past attempts to create stable coins. [...] Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference. Stablecoins are more useful than volatile cryptocurrencies as a medium of exchange. Stablecoins may be pegged to a currency like the U.S. dollar or the price of a commodity such as gold. Stablecoins pursue price stability by maintaining reserve assets as collateral or through algorithmic formulas that are supposed to control supply. [...] Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for everyday transactions. ### Key Takeaways

• Stablecoins 101: Behind crypto's most popular asset - Chainalysis

  Stablecoins are programmable digital currencies, most commonly pegged 1:1 to fiat currencies like the USD. Primarily issued on networks like Ethereum and Tron, stablecoins have combined the power of blockchain technology with the financial stability necessary for practical use cases of cryptocurrencies. [...] ### On-ramp to DeFi Stablecoins are the backbone of many DeFi protocols, facilitating lending, borrowing, and yield farming. Their lack of price fluctuation makes them ideal for liquidity pools, where they reduce impermanent loss and maintain the efficiency of decentralized exchanges (DEXs). Stablecoins also enable global access to financial services, empowering users in economically unstable regions to participate in DeFi markets without exposure to local currency volatility. [...] Stablecoins have become a preferred store of value in regions facing economic instability or high inflation. By pegging their value to assets like the USD, stablecoins offer individuals and businesses a way to preserve purchasing power and shield their assets from the volatility of local currencies. This use case has been particularly impactful in emerging markets where access to stable financial instruments is limited and a straightforward on-ramp to the USD is highly desired.

• What is a Stablecoin? A complete guide for beginners - USDC

  In a world where cryptocurrencies like bitcoin (BTC) and ether (ETH) often make headlines for their volatility, stablecoins stand out as the closest thing to real money (i.e., fiat currency) that currently exists on the blockchain. Stablecoins are a type of digital currency designed to maintain a stable value while gaining the efficiency, mobility, and utility of blockchain-based digital assets. [...] By maintaining a stable value tied to reliable assets like the US dollar, stablecoins like USDC enable users to maintain the value of their savings relative to the US dollar. Stablecoins also serve as an entry point to global financial markets, enabling individuals to save, invest, and transact in a stable digital currency. This can be particularly transformative for communities that have limited access to traditional financial systems. See how USDC offers dollar access in over 180 countries. [...] Stablecoins minimize price volatility by anchoring their value to stable assets, such as fiat currencies, commodities, or other financial instruments. Unlike traditional cryptocurrencies, which can experience significant price swings, stablecoins aim to offer the stability and reliability of traditional money while retaining the advantages enabled by blockchain such as fast, low-cost, highly-secure, transactions. Utilizing blockchain networks also allows stablecoin transactions to bypass banks

• Stablecoins Explained: Types, Use Cases, and Future Trends

  A stablecoin is a digital currency pegged to another asset. While it falls under the digital asset category, like cryptocurrencies such as Ethereum (ETH) and Bitcoin (BTC), the two asset classes are inherently different.

• What Are Stablecoins and How Do They Work? - Gemini

  Stablecoins are digital currencies minted on the blockchain network that are typically identifiable by one of four underlying collateral structures: fiat-backed, crypto-backed, commodity-backed, or algorithmic. While underlying collateral structures can vary, stablecoins aim for the same goal: stability. Let’s discuss the four primary types of stablecoins. Traditional Collateral (Off-Chain) ---------------------------------- [...] As their name suggests, stablecoins are inherently stable assets. This makes them suitable stores of value and encourages their use in everyday transactions. Further, stablecoins improve the mobility of crypto assets throughout the ecosystem. [...] Due to crypto assets' inherent instability, stablecoins are growing in popularity with both crypto and traditional markets. Stablecoins are a type of crypto asset, but one that offers a way to bridge the gap between fiat currencies like the U.S. dollar and cryptocurrencies. Because they are price-stable digital assets that behave like fiat but maintain the mobility and utility of cryptocurrency, stablecoins are a novel solution to crypto volatility: price stability is built directly into the