What is a stablecoin?

A stablecoin is a crypto token designed to follow a reference value, often a currency such as the US dollar.

For example, 20 USDC is intended to represent about $20 in dollar value. That does not mean every app will exchange it for exactly $20 after fees, or that its value never changes.

A little more technical

Stablecoins use different designs. For USDC, the issuer Circle describes reserves of cash and cash-equivalent assets backing the tokens. Direct redemption has eligibility requirements. An individual often uses an exchange or payment provider instead.

Common misunderstanding

“Stable” is a target, not a promise of no risk. The issuer, reserves, software, network and conversion provider all matter. A dollar-linked token also does not keep a fixed value in Brazilian reais when the exchange rate changes.

Source: Circle’s description of USDC and redemption access. USDC is an example, not a claim that every stablecoin has the same backing.