Stablecoin

A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to an external asset, such as a fiat currency like the U.S. dollar or a commodity like gold. Stablecoins are used to reduce the volatility commonly associated with cryptocurrencies like Bitcoin and Ethereum. They are widely used in DeFi, cross-border payments, and as a medium of exchange within the crypto ecosystem. Popular stablecoins include Tether (USDT), USD Coin (USDC), and DAI. Stablecoins can be backed by fiat reserves, crypto collateral, or use algorithmic mechanisms to maintain their peg. For example, USDT is backed by dollar reserves, which helps maintain its 1:1 value with the U.S. dollar.