A stablecoin is a cryptocurrency designed to hold a steady price — usually one US dollar. It combines the boring price stability of cash with the 24/7, borderless transferability of crypto. That combination is why stablecoins have become the default way to move dollars across borders without touching a bank wire.
How the peg works
Different stablecoins keep their $1 price in different ways, and the mechanism is the single most important thing to understand before you hold one:
- Fiat-backed (USDT, USDC, PYUSD, FDUSD). The issuer holds reserves — cash, Treasury bills, and similar assets — equal (ideally) to the coins in circulation. You can, in principle, redeem 1 coin for $1 with the issuer. The peg is only as good as the reserves and the attestations behind them.
- Crypto-collateralized (DAI). Users lock up crypto worth more than the DAI they mint (over-collateralization). If collateral value falls too far, positions are liquidated to protect the peg.
- Synthetic / delta-neutral (USDe). Ethena’s USDe holds spot crypto and shorts the equivalent futures, so price moves cancel out. It pays yield, but depends on derivatives markets behaving — a different risk profile from fiat-backed coins.
The major coins at a glance
| Coin | Issuer | Backing | Notes |
|---|---|---|---|
| USDT | Tether | Fiat + other assets | Largest by far; deepest liquidity worldwide |
| USDC | Circle | Cash + short-term Treasuries | US-regulated issuer; popular with institutions |
| DAI | Sky (MakerDAO) | Crypto collateral + RWA | The original decentralized stablecoin |
| PYUSD | PayPal / Paxos | Fiat | Integrated into PayPal and Venmo |
| FDUSD | First Digital | Fiat | Prominent on Binance |
| USDe | Ethena | Delta-neutral strategy | Yield-bearing; synthetic, not fiat-backed |
What people actually use them for
- Cross-border payments. Sending $1,000 in USDT costs a flat network fee (often under a dollar on low-cost chains) and settles in minutes, versus $25–50 and days for a bank wire. Try the numbers in our fee calculator.
- Spending via crypto cards. Cards like RedotPay let you spend USDT/USDC anywhere Visa or Mastercard is accepted — see the U-card guide.
- A dollar account without a US bank. In high-inflation economies, stablecoins are a practical way to hold dollar value.
- Trading and DeFi. The quote currency for most crypto markets.
The risks, plainly
- Depeg. Stablecoins can and do trade below $1 during market stress. Fiat-backed coins depend on reserve quality; algorithmic designs can fail outright (UST collapsed in 2022).
- Issuer risk. You are extending credit to Tether, Circle, or whoever issues the coin. Read their attestation reports.
- Freeze risk. Major fiat-backed issuers can blacklist addresses at the request of law enforcement. Your balance is not bearer cash.
- Chain risk. The same coin exists on many networks (Ethereum, Tron, Solana…). Sending on the wrong chain can strand or lose funds — always match the network the recipient expects.
Where to go next
Convert between coins with the stablecoin converter, learn the terminology in the Web3 payments glossary, and check the rules in your country in regulations.