What are stablecoins?
Stablecoins are cryptocurrencies whose price is tied to stable assets, most often the US dollar (USD), but can also be tied to the euro, gold, or oil.
Their main goal is to avoid sharp price fluctuations, like those of Bitcoin or Ether.
USDT (Tether) — 1 USDT ≈ 1 US dollar
USDC (USD Coin) — 1 USDC ≈ 1 US dollar
DAI — a decentralized stablecoin, also ≈ 1 USD
There are three types of stablecoins:
1. Fiat-backed (backed by money)
Example: USDT, USDC
For every token in circulation, there is 1 dollar (or another asset) in a bank account.
Reliable, but centralized — there is a company that manages them.
2. Crypto-collateralized. Example: DAI
Backed by cryptocurrencies (e.g., ETH) and operate on smart contracts.
More decentralized, but more unstable during collateral price drops.
3. Algorithmic
Example: there was UST (Luna)
They maintain the peg through automatic algorithms — but they can fail, as happened with Luna in 2022 (loss of billions).
Why are stablecoins needed?
Convenient to pay: fast transfers without banks.
🏦 Store of value: like a 'dollar on the blockchain'.
📉 Avoiding volatility: you can hold assets without the risk of fluctuations.
Working in DeFi: staking, lending, farming, etc.
Risks:
❌ Not all are backed 1:1 (especially USDT — there have been disputes).
👥 Centralization = risk of account freezing or blocking.
📉 During a crisis — it can decouple from the dollar (as happened with UST).
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