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What are stablecoins? A blockchain expert explains

Stablecoins are a type of cryptocurrency linked to an asset like the U.S. dollar that doesn’t change much in value.

The majority of the dozens of stablecoins that currently exist use the dollar as their benchmark asset, but many are also pegged to other fiat currencies issued by governments like the euro and yen. As a result, the price of stablecoins fluctuates very little, unlike high-profile cryptocurrencies like bitcoin and ethereum that are prone to sudden ups and downs.

The first stablecoin, created in 2014, was Tether, which many other stablecoins are modeled after. Users receive one token for every dollar they deposit. In theory, the tokens can then be converted back into the original currency at any time, also at a one-for-one exchange rate.

As of July 28, 2021, there were about $62 billion in Tether outstanding, or a bit more than half of the $117 billion market capitalization of all stablecoins worldwide. The next-largest is known as USD Coin, which has a market cap of about $27 billion.

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