What Are Stablecoins? Crypto That Stays Worth a Dollar

Stablecoins are cryptocurrencies built to hold the same value every day, almost always one US dollar. Bitcoin's price moves constantly; a stablecoin is not supposed to move at all. That makes it the part of crypto people actually use as money — for paying, for parking cash between trades, and for sending dollars abroad. Tether (USDT) and USD Coin (USDC) are the two largest, and stablecoins together are now worth more than 300 billion dollars.

How does a stablecoin stay worth a dollar?

The common design works like a cloakroom ticket. You hand a company a dollar, it gives you a token, and it promises to swap that token back for a dollar whenever you ask. As long as the dollars are really there, the token trades at about a dollar, because anyone who could buy it for less would buy it and redeem it for the full amount. Circle, which issues USDC, publishes regular reports on what sits behind the tokens, and Tether does the same for USDT. Other designs exist — DAI is backed by other crypto locked up as collateral — but the cloakroom model covers most of the market.

What do people use them for?

Sending money is the big one: a payment to another country arrives in minutes, at any hour, with no bank in between. Traders sell into stablecoins when they want out of a price swing without leaving crypto. In countries where the local currency loses value fast, people hold dollars in a phone wallet instead of in cash. And stablecoins are the fuel of decentralized finance: most lending on Aave and much of the trading on Uniswap is done in them.

What can go wrong?

A stablecoin is only as good as whoever stands behind it. If the reserves are not really there, the promise breaks. That is what happened in 2022 to TerraUSD, which was held together by a mechanism rather than by dollars, and which fell to almost nothing in a week. The second risk is plainer: this is still crypto, so a payment sent to the wrong address cannot be reversed by anyone.

One practical warning. The same stablecoin exists on several networks, and USDC on Ethereum is not the same thing as USDC on Solana. Before you move any, check that the sender and receiver are using the same network, and send a small test amount first. If you are not sure where the tokens are actually kept, start with what a crypto wallet is.