Stablecoin
In plain English
A crypto token designed to hold a steady value, almost always one US dollar — used as a safe harbour and as the trading unit of most crypto markets.
What is a stablecoin?
A stablecoin is a cryptocurrency built to keep a constant price rather than to appreciate. The overwhelming majority target one US dollar. They exist because volatility makes ordinary crypto awkward for payments, savings and trading pairs.
The main types
Fiat-backed stablecoins such as USDT and USDC are the largest by far. A company holds dollars and short-term government debt in reserve and issues one token per dollar held. Trust rests on those reserves being real, sufficient and regularly audited.
Crypto-backed stablecoins are collateralised with other crypto, deliberately over-collateralised to absorb price swings. If the collateral falls too far in value, the system liquidates it automatically.
Algorithmic stablecoins tried to hold the peg through supply mechanics rather than collateral. This category has a poor record — the collapse of TerraUSD in 2022 erased tens of billions of dollars in days and remains a cautionary example.
Why they dominate trading
Most crypto trading pairs are quoted against a stablecoin rather than against dollars in a bank. It lets traders move in and out of positions without leaving the crypto system, and it works around the clock, unlike banking rails. Stablecoins are also widely used for cross-border transfers, where they often settle faster and cheaper than a wire.
What to watch
A stablecoin is only as reliable as the thing backing it. Look at who issues it, what the reserves actually contain, whether attestations are published, and how the token has behaved during past market stress. A stablecoin can lose its peg — briefly or permanently — and "stable" describes the design goal, not a guarantee.