What is a stablecoin?#
A stablecoin is a cryptocurrency tied to a stable asset in order to maintain a stable price.
Unlike most cryptocurrencies, a stablecoin's price does not move freely with the supply and demand of the token itself. Instead, it is designed to track the value of whatever it is tied to.
Stablecoins can be tied to:
- Paper (fiat) money, such as a US dollar peg
- Another cryptocurrency
- An algorithm enforced by smart contracts
Well-known examples of fiat-backed stablecoins include USDC, USDT, and DAI. Always verify a stablecoin's token contract address before swapping, since the mechanism and backing behind a peg vary by token.