Stablecoins · 9 min read

What Are Stablecoins and Why Do They Matter?

Explore fiat-backed, crypto-backed, and algorithmic stablecoins — plus peg risks and everyday use cases.

Educational content only. No financial, legal, tax, or investment advice.

Why stablecoins exist

Stablecoins aim to track a reference value — often one U.S. dollar — while living on blockchains. They let users move dollar-denominated value quickly without converting to fiat on every transfer.

Businesses, freelancers, and traders use them for payments, treasury holding, and as a bridge asset between volatile tokens.

Main stablecoin designs

Fiat-backed models hold reserves in bank accounts or treasuries. Crypto-backed models over-collateralize with volatile assets. Algorithmic designs use supply mechanics that failed catastrophically in past cycles.

Each design carries distinct audit, custody, and depeg risks. "Stable" describes intent, not a guarantee.

Before you hold or send stablecoins

Confirm which network your counterparty expects — USDC on Ethereum is not the same address format as USDC on another chain without careful bridging.

Read issuer attestations, redemption policies, and blackout history. Keep records for accounting and tax questions.