DeFi 10121 August 2021

What Is a Stablecoin?

What is a Stablecoin?

Summary

  • Stablecoins are backed by reverse assets
  • Stablecoins try to peg their market value to some external reference
  • Stablecoins achieve their price stability via collateralization (backing)

Stablecoin is a term used to refer to a new ryptocurrencies class backed by reverse assets to try to offer price stability. Stablecoins strive to give investors the best of both worlds by offering instant processing and privacy, and security in cryptocurrency payments while offering volatile-free valuations of fiats.

Stablecoins are an attempt to close the gap between cryptocurrencies and fiat currencies. They hope to achieve this by creating a reserve backing under Fiat-Collateralized Stablecoins and by offering a central authority for price control whenever needed through the non-collateralized (algorithmic) stablecoins.

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