However, this technology faces significant regulatory and security risks. Although the ability to redeem gold-backed stablecoins for how can i keep my netflix account secure physical gold is universal across active platforms, other commodity-backed stablecoins lack the same utility. For example, Venezuela’s exploratory Petro stablecoin isn’t redeemable for a barrel of oil. While stablecoins backed by other commodities like real estate have made headlines in recent years, a lack of active projects makes it difficult to draw further comparisons.

MoonPay allows you to easily buy stablecoins including USDT, USDC, DAI, and PYUSD using your credit card or any other preferred payment method. You can trade stablecoins like USDC (SOL) on MoonPay for any supported Solana token in seconds and low fees. Trade for coins like Solana (SOL), meme coins like OFFICIAL TRUMP (TRUMP) and Bonk (BONK), stablecoins like USDT (SOL) and PYUSD (SOL), and much more. For instance, decentralized applications (dApps) like Aave and Compound allow users to deposit stablecoins into lending pools, which are then borrowed by other users.

Algorithmic (Non-Collateralized) Stablecoins

For the greatest security, it is wise to make sure a stablecoin issuer provides redemption services. DAI is similar to a US Dollar stablecoin in that its price is pegged to the dollar. DAI, however, uses cryptocurrency like ether (ETH) instead of US currency for its reserve assets. Stablecoins form the backbone of many DeFi protocols, serving as a stable unit of account for lending, borrowing and yield farming.

For one, their increased use in money laundering and terrorist financing poses risks to national security. In addition, increased holdings of stablecoins by the public could potentially draw down bank deposits and thereby limit the efficacy of monetary policy. The composition of reserves also has implications for public finance—U.S. Treasury securities, not cash, are currently the favored reserve asset of the largest stablecoin issuers, who are already as significant holders of Treasury bills as the largest U.S. money market funds. Stablecoins enable more efficient cross-border transactions and remittances reducing costs and increasing speed compared to traditional banking systems.

How are stablecoins used?

Stablecoins enable seamless cross-border transactions, simplifying global commerce without complex currency exchanges. They allow participation in the global digital economy for those previously excluded, promoting financial inclusion. For multinational corporations, stablecoins can streamline treasury operations, reducing the complexity and cost of managing multiple currencies across different jurisdictions. The reliability of oracles is key to the stability of stablecoins. Inaccurate or delayed data can lead to a loss of the stablecoin’s peg, resulting in potential losses for users. For what is bitcoin is it safe and how does it work this reason, stablecoin issuers often use multiple oracles and aggregate their data to ensure accuracy and reduce the risk of manipulation.

Send Payments

Uniquely, the Wyoming legislature in 2023 authorized a new state commission to issue redeemable Wyoming Stable Tokens (WYST) against reserves consisting exclusively of U.S. Treasury bills in the amount of 100% to 102% of outstanding tokens. Any interest earned on reserves above the 102% mark will be used to pay first for the commission’s operating costs and then for schools. Here’s how each tries to stay pegged to the dollar, with code, incentives, and the occasional safety net. Stablecoins appear positioned for increasing mainstream traction, but the floodgates have not quite opened yet.

Remember that the crypto world can be unpredictable, as 2022’s TerraUSD collapse showed. You can always exchange stablecoins for real dollars directly with the issuer. If price drops below $1, people buy cheap stablecoins and redeem them all about mining bitcoin using your mobile for $1, pushing price back up.

DAI (MakerDAO) – $4.8 Billion

JP Morgan analysts offer a more conservative forecast, pegging stablecoin growth at $500 billion by 2028. Carlos Eduardo Bernos Amoros is a 2025 MBA graduate and current researcher at the Emerging Markets Institute at the Samuel Curtis Johnson Graduate School of Management. He is the cohost of Dentro del Bloque, a blockchain education podcast focused on Latin America with over 60 episodes. He has also conducted research for the Cornell Brooks School Tech Policy Institute, exploring the relationship between Bitcoin and financial freedom.

While convenient, this goes against the core values of decentralized finance. If the issuer isn’t transparent or solvent, users are exposed to risks — including blacklisting or frozen funds. Crypto-collateralized stablecoins use other cryptocurrencies as collateral.

Liquidity in Crypto Markets

As of the date this article was written, the author does not own cryptocurrency. In the world of crypto, understanding the difference between coin vs token is essential for anyone looking to navigate the… These use code and game theory to try and stay pegged — with mixed results. Built In strives to maintain accuracy in all its editorial coverage, but it is not intended to be a substitute for financial or legal advice. Stablecoins come with a range of upsides that promise to make them a part of the financial landscape for years to come. All of this said, it’s also important to stay mindful of some potential drawbacks.

• The reserve management practices of stablecoin issuers also face scrutiny, with calls for increased transparency and auditing.
• Stablecoins have received a lot of attention in the last few years, and the jury is still out on what their place is in the future of finance.
• Almost all of these—approximately 99%—are pegged to the U.S. dollar, while the rest are pegged to other fiat currencies or commodities like gold.
• For instance, smart contracts used for some stablecoins can be vulnerable to hacks or exploits.

However, there’s a risk that the stablecoin issuer doesn’t actually have enough reserves. A stablecoin’s pegged value is what makes it useful within the world of crypto. But that’s possible only if coin holders can be assured they’ll be able to cash out their stablecoins.

Move between different cryptocurrencies without converting back to dollars each time. For example, wrapped bitcoin (WBTC) is an ERC-20 token that allows Ethereum blockchain (ETH) participants a way to access bitcoin (BTC) on the Ethereum network. If you own one PAXG token, you own one of these gold bars, which are held in a vault in the custody of its issuer, the Paxos Trust Company.

• In the case of stablecoins, this means fixing the coin’s value to an external reference such as a fiat currency, commodity or even another cryptocurrency.
• Remember, a stablecoin’s primary purpose is to provide value stability where other cryptocurrencies may not be able to.
• They can also be bought via on-ramp providers like MoonPay using a card or bank transfer.
• Many fiat-collateralized ones, for example, have similar price stability to the U.S. dollar, so these are often accepted for everyday online transactions and payments.

Another technique involves letting users own a percentage of a blockchain network. In this system, the number of tokens in a user’s wallet automatically rises or falls according to a stablecoin’s daily average price. This helps the value of the stablecoin adjust to changes in supply and demand. A stablecoin is a cryptocurrency with a value that’s tied to that of another currency or asset like the U.S. dollar.