Stablecoins

Its name promises stability. Its mechanism tries to produce it.

In four minutes: understand the peg, see what supports it and know what to check before holding one.

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A stablecoin is a cryptoasset that targets a stable value relative to a reference, often one dollar or one euro.

That target is the peg. It is not a guarantee: the market price can move away from it.

Returning to the target requires a credible issuance, redemption or collateral mechanism.

Three mechanisms are enough to tell them apart:

Traditional assets — cash, deposits or liquid securities held in reserve

Crypto collateral — locked cryptoassets, usually in excess to absorb their volatility

Algorithmic mechanism — supply and incentives try to restore the target, sometimes without sufficient reserves

On-chain, it can serve as a unit of account, a means of exchange and a temporary shelter from other cryptoassets' volatility.

It can move around the clock, but speed, cost and finality depend on the network and service used.

When backed by money or other assets, it already connects traditional finance with programmable ledgers.

The targeted stability depends on the mechanism, asset quality and the actual ability to redeem tokens.

Because a centralised issuer keeps its hand on the ledger: it can freeze an address, by order or on its own.

In the European Union, MiCA regulates the offer and admission to trading of many stable-value tokens through their issuer.

Four checks are enough before trusting one:

Four habits cover crossing stablecoins without getting burned:

The stablecoin is the first step of tokenisation: a dollar, carried onto the chain as is.

After the dollar come the building and the receivable — other real assets, carried across the same way.

This course does not stop here: the collection explores those next steps, one by one.