Stablecoin

A stablecoin is a cryptocurrency pegged 1:1 to a stable reference asset — almost always the US dollar. It's the piece that makes crypto usable for payments and as an on-chain unit of account, because BTC or ETH moving 5% a day is fine for speculation but useless for pricing a coffee. Three mechanisms, with very different risk profiles: fiat-backed (USDC, USDT) — the issuer holds real dollars in a bank and redeems 1:1, simple but trust-based; crypto-backed (DAI) — over-collateralised by ETH in smart contracts, trustless but capital-inefficient; algorithmic (TerraUSD) — held by incentives with no real backing, which collapsed spectacularly in 2022 and mostly killed the category. Today stablecoins are the dominant settlement asset on-chain — they outvolume Bitcoin most days.