Stablecoin

A stablecoin is a type of cryptocurrency whose main characteristic is price stability. Unlike common cryptocurrencies like Bitcoin or Ethereum, which are known for their large and rapid price fluctuations (volatility), the value of a stablecoin is pegged to another, more stable asset. Most often, this is a fiat currency, such as the U.S. dollar (USD) or the euro (EUR), with the goal of maintaining a 1:1 ratio. In this way, they combine the advantages of cryptocurrencies—fast, cheap, and global transactions without intermediaries—with the trustworthiness and stability of traditional money.

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There are several types of stablecoins, differing in how they maintain their value. The most common are fiat-collateralized stablecoins (e.g., USDT, USDC), where the issuer holds an equivalent amount of the corresponding currency in bank reserves. Next are crypto-collateralized stablecoins (e.g., DAI), which are over-collateralized with more volatile crypto assets to ensure stability. The third category is algorithmic stablecoins, which are not backed by any asset; their value is managed by smart contracts that automatically regulate supply and demand. In practice, stablecoins are most commonly used on cryptocurrency exchanges for trading and as a temporary safe haven from market volatility.