What Are Stablecoins?

Krutika Adani

Definition

Stablecoins are a type of cryptocurrency designed to maintain a stable value, unlike more volatile coins like Bitcoin.

Fiat-Backed Stablecoins

Fiat-backed stablecoins are pegged to traditional currencies like the US dollar. Each stablecoin is supported by a reserve of fiat money, making it less volatile.

Crypto-Backed Stablecoins

Crypto-backed stablecoins are backed by other cryptocurrencies. These coins rely on a system of smart contracts to maintain their value through over-collateralization.

How They Work

Fiat-backed stablecoins rely on real-world reserves to stay stable, while crypto-backed coins use other cryptos as collateral, adjusting for market fluctuations.

Why Stablecoins Matter

Both types of stablecoins offer stability in the volatile world of crypto, making them a popular choice for traders and investors looking for less risk.

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