Stablecoin
A token designed to maintain a stable value, usually pegged 1:1 to a fiat currency like the US dollar.
Stablecoins combine the programmability of crypto with the price stability of fiat. They serve as the settlement layer of DeFi — enabling trading, lending, and payments without volatility exposure. The US dollar is by far the most common peg target.
Fiat-backed stablecoins (USDC, USDT) hold real-world dollars or equivalents in reserve. Crypto-backed stablecoins (DAI, LUSD) are overcollateralised with on-chain assets. Algorithmic stablecoins attempt to maintain the peg through mint/burn mechanisms — most famously, TerraUSD's collapse in May 2022 wiped $40 billion of value and exposed the fragility of algorithmic approaches.
Regulatory scrutiny of stablecoins is increasing globally, with issuers like Circle and Tether facing demands for reserve transparency and potential licensing requirements in the EU (MiCA) and US.