Stablecoins
Tokens designed to track a currency: the three designs and what can go wrong.
In short
Explainer, 8 min read (sample)
A stablecoin is a token that tries to keep a steady value, usually one US dollar. It is used to move value between apps without leaving crypto.
Some are backed by cash and bonds held by a company, some by other crypto locked in a smart contract, and some only by an algorithm. Each design has failed at least once.
What matters is what stands behind the token, who checks it and whether holders can swap it back. A steady value is a goal, not a promise.
Not financial advice. This explainer describes how something works. It does not say whether to buy, sell or hold anything.
Key points
- Backed by reserves, by crypto, or by an algorithm
- Read who audits the reserves, and how often
- Redemption rules decide what happens in a panic
- A stable value is a design goal, not a promise
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