#BigTechStablecoin are a type of cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency like the US dollar (USD), euro (EUR), or commodities like gold.
What Are Stablecoins?
Stablecoins aim to combine:
The stability of traditional fiat currencies
The efficiency and borderless nature of cryptocurrencies
Types of Stablecoins
1. Fiat-Collateralized Stablecoins
Backed 1:1 by fiat currency held in reserve.
Coin Pegged To Issuer Notes
USDT (Tether) USD Tether Ltd. Most used, but sometimes questioned over transparency
USDC USD Circle + Coinbase Audited reserves, widely trusted
BUSD USD Binance (phased out as of 2024) Regulated by NYDFS
TrueUSD (TUSD) USD Archblock Independent attestations of reserves
2. Crypto-Collateralized Stablecoins
Backed by other crypto assets, often over-collateralized to manage volatility.
Coin Pegged To Collateral Notes
DAI USD ETH, USDC, others Managed by MakerDAO; decentralized
3. Algorithmic Stablecoins
Use algorithms and smart contracts to maintain the peg without collateral.
Coin Pegged To Notes
FRAX USD Partially collateralized, partially algorithmic
UST (defunct) USD Lost peg in 2022, leading to major crash
Algorithmic stablecoins are riskier and have a history of failures (e.g., TerraUSD/UST collapse).
Why Use Stablecoins?
Avoid crypto volatility (e.g., compared to Bitcoin or Ethereum)
Transfer money globally with low fees and speed
Earn interest/yield on DeFi platforms
Use in trading to hedge or move between coins
Risks of Stablecoins
Centralization (e.g., USDT and USDC can be frozen)
Lack of transparency in reserves (especially with Tether)
Regulatory risk (growing scrutiny from governments)
Smart contract risk (for decentralized stablecoins)
