What is Stable coin ?

A stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging it to a reserve asset, such as a fiat currency (like the U.S. dollar), a commodity (like gold), or even other cryptocurrencies. The goal of stablecoins is to reduce the price volatility typically seen in other cryptocurrencies like Bitcoin and Ethereum, making them more suitable for everyday transactions and as a store of value.

Types of Stablecoins:

Fiat-backed stablecoins – Pegged to a fiat currency and backed by reserves held in banks (e.g., USDC, USDT).

Crypto-backed stablecoins – Backed by other cryptocurrencies and often overcollateralized to account for price volatility (e.g., DAI).

Algorithmic stablecoins – Maintain their peg through supply and demand adjustments controlled by algorithms (e.g., FRAX).

Stablecoins have become essential in the crypto ecosystem, enabling seamless trading, lending, and cross-border transactions without the risk of significant price swings.

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