What is a stable coin?


As someone that has extremely little understanding of blockchain technologies – how might someone dumb this right down for me?

Thank you 🙂

In: 3

It’s a cryptocurrency with a value pegged to some external reference (such as the US dollar) by some means such as an automatic exchange to a related cryptocurrency or an issuer who is willing to issue/buy enough of the currency to maintain that price.

A stable coin is a type of cryptocurrency in which the value is *supposed* to stay the same over time. For example, it might be worth $1 or 1 gram of gold.

Stablecoins are good if you want to actually *use* cryptocurrency, not just invest in it. From my understanding, many people that actually use cryptocurrency to make purchases are buying something illegal online.

Stable coins can also be helpful for cryptocurrency investors trying to avoid fees. Let’s say you own $1000 worth of Crapcoin but the value is starting to drop. You might decide to sell it. If you sell it for US dollars, you might have to pay $100 in fees! But if you convert it to a stable coin, you might only lose $10 in fees.

One last thing: stablecoins are not guaranteed to keep their value. There’s still risk in holding them. A stablecoin recently lost about 90% of its value in less than a week.