What is a stablecoin? A quick overview for newbies.

Stablecoin = "stable" cryptocurrency. It is pegged to a fixed asset like (USD, EUR, gold...) to avoid the wild fluctuations of Bitcoin or Ethereum.

Why do we need stablecoin?

BTC today is 50k, tomorrow it will be 45k and then 55k again - too unstable for daily trading. Stablecoin solves this problem:

• Maintain a stable price (1 USDT ≈ 1 USD always)
• Safe value storage during a bear market
• Serve as a "bridge" between fiat money and crypto

Main types

Supported by fiat: USDT ( Tether - market cap 83 billion USD, accounting for 68% market share ), USDC ( 26 billion USD ), BUSD

Supported by crypto: DAI (5.3 billion USD - created by MakerDAO), USDD (723 million USD on TRON)

Backed by commodities: Tether Gold (XAUT - each token = 1 ounce of gold), Pax Gold (PAXG)

Algorithm: Frax (810 million USD - using hybrid mechanism ), USDD

The number 2023

As of August 2023:

• More than 140 stablecoins exist on CoinMarketCap
• USDT still holds the #1 position with over 2/3 market share.
• USDC ranks second, DAI third, USDD fourth
• New character: FDUSD ( Hong Kong ) has just made it to the top 10, First Digital USD can be converted to real USD.
• PayPal USD has just launched, EUR Coin is also on the field.

What is it used for?

✅ Trade without fear of price plummeting ✅ Use collateral in DeFi ✅ Lending on the platform = earning passive interest ✅ Transfer money across borders without the need for a bank ✅ "Safe haven" in a bear market

Risks?

⚠️ Algorithmic stablecoins can crash (UST is a lesson) ⚠️ Regular audits of reserves are needed to ensure backing. ⚠️ Regulations are still ambiguous in many countries. ⚠️ If not fully backed, you may lose money

TL;DR: Stablecoin is the "safe haven" of crypto - maintaining a stable price, easy to trade, and becoming the backbone of DeFi. More than 140 types exist, but USDT + USDC + DAI account for the majority of the market.