A stablecoin is a crypto asset that tracks a fiat ("real world") currency. The most common stablecoins track the United States Dollar.
Stablecoins allow the crypto community to use these advanced new DeFi systems with assets that have significantly less volatility in value than traditional crypto assets like ETH and BTC.
There are a number of ways that stablecoins work (or try to work). They each have their pros and cons.
- Fiat backed
- Crypto backed
- Protocol Controlled Value