Stablecoins are cryptocurrencies designed to maintain a stable value, usually by linking their value to assets such as fiat currencies or precious metals.
They aim to provide an alternative to the high volatility of popular cryptocurrencies like Bitcoin, making them more suitable for daily transactions.
Stablecoins can be used in various blockchain-based financial services and even for payment of goods and services.
There are different types of stablecoins, including those backed by fiat currency at a 1:1 ratio, such as USDC and USDT.
Others are backed by cryptocurrencies, such as DAI, which requires the deposit of ETH into a smart contract to generate units.
There are also stablecoins pegged to commodities, such as gold, and those that use algorithms to maintain price stability.
The advantages of stablecoins include price stability, ease of transfer, and the ability to conduct international transactions at low cost.
Additionally, they can serve as a bridge between the traditional financial world and the cryptocurrency market.
Some of the main stablecoins include:
USDC (USD Coin): Created by Circle, it is one of the most widely used stablecoins and is pegged to the US dollar.
USDT (Tether): Launched in 2014, it is the first stablecoin and claims to be pegged to the US dollar at a 1:1 ratio.
DAI: A stablecoin generated through smart contracts on Ethereum, pegged to other crypto assets.
PAX Gold (PAXG): A stablecoin pegged to gold.
TerraUSD (UST): An algorithmic stablecoin, whose stability is achieved through algorithms and smart contracts.
Stablecoins have gained popularity in the cryptocurrency market, with a market capitalization exceeding $100 billion.