Why do stablecoins exist?
Volatility is the biggest problem for crypto adoption — Bitcoin can fall 30% in a week. Stablecoins solve this: cryptocurrencies whose value is pegged to a stable asset, typically the US dollar (1 stablecoin = 1 USD). Used for trading, savings, DeFi and international transfers without volatility exposure.
Fiat-collateralized stablecoins
The most popular type. Each token is backed by real USD held in the company's reserves:
- USDT (Tether) — largest by market cap (~$100B). Centralized, Tether Ltd. holds reserves. Historically controversial reserve transparency.
- USDC (Circle) — regulated, monthly reserve audits, higher transparency than USDT. De facto standard in DeFi.
Crypto-collateralized stablecoins
DAI (MakerDAO) is a decentralized stablecoin collateralized by crypto assets (ETH, WBTC) through smart contracts. To mint 100 DAI, you must deposit crypto worth ~$150-200 as collateral (over-collateralization). Automatic liquidation if collateral drops below the threshold.
Where and how to use stablecoins
- Parking profits — sell crypto to USDC during bear signals, without returning to fiat
- DeFi yield — deposit USDC/USDT on Aave, Compound or Binance Earn for 5-12% APY
- International transfers — send USDT in seconds, fee <$1 (TRC-20 network)
- P2P trading — buy/sell USDT P2P for cash or local currencies
Stablecoin risks
- De-peg risk — the collapse of UST, temporary USDC de-peg during the SVB bank failure
- Regulatory risk — authorities can freeze USDT/USDC addresses (centralized)
- Collateral risk — transparency of Tether reserves remains questionable