CoinMarketLabA stablecoin is a token designed to hold a fixed value, usually one US dollar. They are the main settlement currency of crypto, and they differ in how they hold that peg.
Three designs
- Fiat-backed: a company holds cash and short-term government bonds against tokens (USDT, USDC, PYUSD).
- Crypto-backed: users lock excess crypto in smart contracts to mint tokens (DAI and its successors).
- Synthetic: the peg is held by hedged derivative positions (USDe and similar). Higher yield potential, more complex risk.
What to check
- Reserves: what backs the token and how often it is attested.
- Redemption: who can redeem directly and at what size.
- Regulation and jurisdiction of the issuer.
- Chain support and liquidity where you need it.
- History of the peg under stress.
Which for what
For trading liquidity, the largest tokens usually have the deepest books. For DeFi, check which token each protocol supports. For savings, read the reserves and the issuer terms before you chase a yield.
Stablecoins can lose their peg. Do not keep more in one issuer than you can afford to see delayed or discounted. Not financial advice.