A stablecoin is a type of cryptocurrency designed to maintain a consistent value, typically pegged to a fiat currency like the U.S. dollar or to commodities such as gold. The idea is to combine the best of both worlds—price stability with the efficiency of blockchain.
There are three main types of stablecoins: fiat-collateralized (e.g., USDC, USDT), crypto-collateralized (e.g., DAI), and algorithmic (e.g., the now-infamous UST). Each has its own mechanism for keeping the peg stable, ranging from holding reserves to adjusting token supply automatically.
Stablecoins play a vital role in the crypto ecosystem. They provide a safe haven during volatility, facilitate trading pairs on exchanges, and serve as the backbone for many DeFi applications. Their increasing usage is also drawing attention from regulators concerned about financial stability.
