Stablecoins Explained
Crypto assets designed to hold a steady value, and how they stay stable.
What you’ll learn
- •Stablecoins aim to hold a steady value, typically pegged 1:1 to a fiat currency, letting DeFi be used without crypto's usual volatility.
- •Fiat-backed stablecoins rely on trusting a company to hold adequate, verifiable reserves and honour redemptions.
- •Crypto-backed stablecoins use overcollateralised crypto and smart contracts instead, trading company trust for collateral and contract risk.
- •Algorithmic stablecoins hold their peg through code-based incentives without full real-asset backing, and are considerably higher risk.
- •A major algorithmic stablecoin lost its peg entirely within days in 2022, wiping out billions in value once confidence broke.
- •Always identify which category a stablecoin falls into, and what actually backs it, before treating it as genuinely safe.
Full lesson and quiz for subscribers.
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