What are Stablecoins? A Beginner’s Guide to the Cryptocurrency with a Stable Value

“Stablecoins” — You’ve heard the term, but what are they?

Stablecoins are a type of cryptocurrency that is designed to maintain a stable value, usually pegged to a fiat currency like the US dollar. Unlike traditional cryptocurrencies such as Bitcoin and Ethereum, which are known for their volatility, stablecoins are designed to provide a more stable and predictable value. In this beginner’s guide, we’ll explain what stablecoins are, how they work, and why they are important.

What are Stablecoins?

Stablecoins are a type of cryptocurrency that is designed to maintain a stable value, usually pegged to a fiat currency like the US dollar. The value of stablecoins is typically backed by an underlying asset, such as a fiat currency, gold, or other cryptocurrencies. This backing helps to ensure that the value of the stablecoin remains stable, regardless of the volatility of the cryptocurrency market.

There are several types of stablecoins, including:

• Fiat-collateralized stablecoins: These are stablecoins that are backed by a fiat currency, such as the US dollar. They are typically issued by a centralized entity, such as a bank or a company, and they are backed by the underlying fiat currency in a ratio of 1:1.