A stablecoin is a type of cryptocurrency built to avoid the sharp price swings common in many crypto assets. Most stablecoins try to stay close to the value of a real-world currency, especially the US dollar.
How stablecoins stay stable
Some stablecoins are backed by reserves such as cash, Treasury bills, or other assets. Others use crypto collateral or algorithmic systems. The design matters because a weak reserve model can break the peg.
Why stablecoins are used
Stablecoins are often used for trading, payments, remittances, and moving funds between exchanges. They are also common in DeFi, where users lend, borrow, or provide liquidity.
Popular examples include Tether (USDT) and USD Coin (USDC). Even when a stablecoin looks simple, users should check its issuer, reserves, fees, and regulatory risks.