Stablecoin is a cryptocurrency designed to maintain a relatively stable value by being linked, or pegged, to another asset, such as a fiat currency, commodity, or financial instrument. Most stablecoins are pegged to major currencies such as the US dollar or euro.
Unlike cryptocurrencies such as Bitcoin or Ethereum, which can experience significant price fluctuations, stablecoins aim to reduce volatility and provide a more predictable store of value.
Depending on the type, stablecoins maintain their value through different mechanisms. Common approaches include:
The stability of a stablecoin depends on its underlying design, reserves, and governance model.
Stablecoins are used across cryptocurrency and payment ecosystems for purposes such as digital asset trading, cross-border transfers, crypto payments, settlement between parties, and storing value with lower volatility than many cryptocurrencies. Their role continues to evolve as financial institutions, fintechs, payment providers, and regulators explore new digital payment models.
