All terms
A token designed to hold a steady value, almost always one US dollar.
Stablecoins are the working currency of crypto. Fiat backed ones like USDC and USDT hold reserves off chain. Overcollateralized ones like DAI are backed by crypto locked in contracts.
They are not all equally safe. Ask what backs it, who holds the reserves, whether they are audited, and what happens in a redemption rush. Algorithmic stablecoins with no real backing have failed catastrophically before.
USDC briefly traded at 88 cents in March 2023 when part of its reserves sat in a failing bank. It recovered, but the lesson stands.
That all stablecoins hold their value the same way. Some hold cash and treasuries, some hold crypto with a buffer, and some held nothing but an algorithm and collapsed. What is behind the peg is the only question that matters.
Common questions
What actually backs a stablecoin?
Can a stablecoin lose its peg permanently?
Where this comes up on the site
The guides that actually use this word, rather than a list of everything we have written.
Where to go next
More defi terms
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