Buy Crypto Markets Spot FuturesPLTR Earn Event Center Rewards Hub

A stablecoin is a stable cryptocurrency backed by fiat currency, cryptocurrencies, or other assets like gold. Its purpose is to anchor the value to fiat currencies such as the US dollar or Euro. ItA stablecoin is a stable cryptocurrency backed by fiat currency, cryptocurrencies, or other assets like gold. Its purpose is to anchor the value to fiat currencies such as the US dollar or Euro. It

Learn/Cryptocurrency Knowledge/Basic Concepts/What is Stablecoin?

What is Stablecoin?

Author: MEXC

Apr 21, 2026MEXC

#Basic #Basic Concepts

QUID$0.10205+240.16%

USDC$1.00066-0.01%

UPID$0.14574+628.70%

A stablecoin is a stable cryptocurrency backed by fiat currency, cryptocurrencies, or other assets like gold. Its purpose is to anchor the value to fiat currencies such as the US dollar or Euro. It combines the decentralized nature of blockchain with real-world fiat currency prices, thus avoiding drastic price fluctuations. Stablecoins are usually used as a medium of exchange.

The earliest stablecoin was USDT (Tether), introduced by Tether Limited in 2014. It is pegged to the US dollar at a 1:1 ratio. Tether claims that for every USDT issued, a corresponding number of US dollars are held in its official account. This ensures that the USDT tokens issued have an equivalent amount of USD as collateral, maintaining a 1:1 exchange ratio between USDT and USD. Moreover, users can verify funds on the Tether platform, ensuring transparency. In theory, this provides users with a high level of security and usability in terms of asset experience.

Additionally, stablecoins like USDC and USDS, which are popular among users, also peg their value to the US dollar and maintain a 1:1 exchange ratio.

1.Classification and Pros and Cons of Stablecoins

Stablecoins are typically categorized into three types: fiat-collateralized stablecoins, cryptocurrency-collateralized stablecoins, and algorithmic stablecoins.

Fiat-collateralized stablecoins are the most popular stablecoins in the market. They are directly pegged to fiat currency at a 1:1 ratio, such as the aforementioned USDT and USDC. The drawbacks of this type of stablecoin include centralization, lack of transparency, and the absence of reserve funds and guaranteed token redemption. Questions regarding whether the USD reserves are sufficient, whether issuing empty tokens could create market bubbles, the security of USD reserves, and the risk of misappropriation of collateral continue to raise concerns.

Cryptocurrency-collateralized stablecoins are similar to fiat-collateralized stablecoins but differ in using cryptocurrencies as collateral, as seen with USDS. The collateral itself is a decentralized cryptocurrency, which addresses credibility issues. This method enables users to create stablecoins by locking up collateral exceeding the total stablecoin amount. However, the challenge lies in the collateral itself, which is a digital asset prone to significant price fluctuations and lacks resilience against unforeseen events.

Algorithmic stablecoins, also known as non-collateralized stablecoins, do not require collateral or any other valuable assets for backing. Their value pegging is entirely achieved through algorithms and smart contracts. Smart contracts manage the supply of issued tokens, and stable prices are maintained through the deflationary/expansionary nature of the token supply, as seen in CrvUSD, FEI, and more. The downside of these stablecoins is that stability is usually maintained by centralized mechanisms, and monetary policies remain complex, unclear, unproven, with potentially inadequate incentive measures. Most projects of this type experience high volatility, and extreme situations can lead to price declines or even collapses, as seen in May 2022 when Luna's algorithmic stablecoin, UST, collapsed.

2.Why Do We Need Stablecoins?

The emergence of stablecoins is grounded in practical necessity. In contrast to fiat currencies, the cryptocurrency market is often volatile—token values often fluctuate significantly from their initial values—making it difficult for investors to store their digital assets. Stablecoins address this issue by being closely tied to underlying assets or fiat currencies, ensuring a stable valuation. Therefore, they can be considered trustworthy safe-haven assets in turbulent markets, as stablecoins can maintain their stability through various mechanisms.

3.Should You Invest in Stablecoins?

Stablecoins offer us a stable digital channel to maintain the stability of our profits. They provide liquidity and serve as a more stable form of decentralized cryptocurrency. However, stablecoins are primarily a means of exchange and collateral, lacking inherent investment qualities.

4.Conclusion

In conclusion, despite their limitations, stablecoins remain an essential part of the cryptocurrency market. Stablecoins are cryptocurrencies backed by assets with valuation, and under various regulatory mechanisms, they can maintain stability within predefined ranges. Therefore, stablecoins not only serve as transactional mediums but also become a "safe haven" for traders and investors, seen as a highly secure locus of long-term investment. If you want to acquire stablecoins, you purchase them quickly and easily on MEXC.

Market Opportunity

Squid Price(QUID)

$0.10205

$0.10205$0.10205

+240.16%

USD

Squid (QUID) Live Price Chart

Hot Crypto Updates

Circle Q2 Earnings Preview: What USDC Growth Means for the Stablecoin Market

Overview When Circle reports second quarter results before the open on August 5, the question is no longer whether it is growing but whether growth has peaked. Consensus calls for roughly $720

Author: James Mitchell

2026-08-03

Samsung Integrates Stablecoins into Samsung Wallet: A Major Step Toward Bringing Digital Assets to Hundreds of Millions of Galaxy Users

Samsung has officially confirmed that Samsung Wallet will support stablecoins in the future, allowing users to manage digital assets alongside payment cards, digital IDs, event tickets, and other

Author: Nguyen Rin Hoang

2026-07-27

MEXC On-chain Daily Report：U.S. CPI posts its first decline since 2020, easing pressure on the Federal Reserve to raise interest rates

Updated: July 15, 2026, 09:30 (UTC+8) | Author: MEXC Headlines U.S. June CPI declined 0.4% MoM. Ripple joins the x402 Foundation. JCB and Circle explore USDC payment solutions. UK delays capital

Author: MEXC

2026-07-15

Circle Korea Expansion Accelerates With Closed Door Meeting for Banks and Exchanges

Overview A closed-door gathering set for July 23 in Seoul is emerging as the newest window into Circle's Korea expansion. According to an exclusive report by The Korea Times, the USDC issuer has

Author: James Mitchell

2026-07-13