A stablecoin is a cryptocurrency whose value is pegged to a real-world asset.
Stablecoins can be pegged to any real-world asset, including gold, the US Dollar, or the Euro. There are a number of stablecoins in circulation, including Tether and USDT, which both use the US Dollar to derive their value.
What are the benefits of stablecoins?
Stablecoins are popular forms of digital currency because they possess the following characteristics:
- Reduced volatility — the price of a stablecoins still fluctuates, but only in line with its pegged asset
- Investor tool — investors can convert their crypto-assets into stablecoins to fix profits without cashing them out
- Simpler compliance — cryptocurrency exchanges can use stablecoins to simplify compliance requirements
People debate whether stablecoins are true cryptocurrencies. Either way, they remain popular in the industry and continue to find wide-spread use in the real world.
