If you’ve watched Bitcoin’s price, you know it can swing wildly in a single day. This volatility makes it difficult to use for everyday payments. Stablecoins solve this by pegging their value to a stable asset, usually the US Dollar.
There are three main types of stablecoins:
- Fiat-Collateralized: Backed 1:1 by real dollars in a bank (e.g., USDT, USDC).
- Crypto-Collateralized: Backed by other cryptocurrencies but over-collateralized to handle price drops.
- Algorithmic: Use smart contracts to automatically increase or decrease supply to maintain the peg.
Stablecoins are the “bridge” between the old world of finance and the new, allowing users to keep their funds on the blockchain without worrying about a sudden market crash.
We’ve covered the basics of the “New Bank.” Should we continue to the next three, focusing on high-level DeFi strategies and the future of banking?