TABLE OF CONTENTS
CRYPTOCURRENCY ALTCOINS
Stablecoins: Definition, How They Work, and Types
By ADAM HAYES Updated July 06, 2023
Reviewed by JULIUS MANSA
Fact checked by SKYLAR CLARINE
What Are Stablecoins?
Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions.
KEY TAKEAWAYS
Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference.
Stablecoins are more useful than more-volatile cryptocurrencies as a medium of exchange.
Stablecoins may be pegged to a currency like the U.S. dollar or to the price of a commodity such as gold.
Stablecoins pursue price stability by maintaining reserve assets as collateral or through algorithmic formulas that are supposed to control supply.
Stablecoins continue to come under scrutiny by regulators, given the rapid growth of the $128 billion market and its potential to affect the broader financial system.
