$USDC What is a stablecoin?

First of all, a brief overview of stablecoins and how they work. The European Central Bank defines stablecoins as “digital units of value that differ from existing forms of currency and rely on a set of stabilization instruments to minimize their price fluctuations against a currency or a basket of currencies.”

Stablecoins are a digital representation of fiat currencies on blockchain networks, designed to mimic fiat prices using a stabilization mechanism. This type of cryptocurrency has a stable price, allowing users to always redeem one coin for 1.$ (or for any other currency they are pegged to). Additionally, cryptocurrencies can be a tool through which traders can shift to a more stable digital asset when cryptocurrency markets are volatile.