A cryptocurrency whose price is attached to a real-life asset or reference.

A stablecoin is any cryptocurrency whose price value is determined by an external asset. Also called a pegged currency, the market value of these virtual currencies is always ‘pegged’ to something external to it, either to a fiat currency like the US dollar or a commodity like gold. As a result, stablecoins are generally less volatile and therefore reliable compared to other types of virtual currencies.

There are 3 major types of stablecoins: the ones with price values pegged to fiat currencies, the ones with price values pegged to other cryptos, and the ones with price values determined by supply-stabilizing algorithms. Examples of stablecoins are USD Coin (USDC), Tether (USDT), Binance USD (BUSD), and Dai (DAI). USTC (TerraUSD Classic) is an algorithmic stablecoin that crashed by more than 99% after losing its peg to the dollar.

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