LeoGlossary: Stablecoin

A cryptocurrency that pegs it value to something else.

This can come in a few different forms:

Stablecoins can be backed by holdings of other assets called a reserve. The most popular is to peg the stablecoin to the USD by having cash and/or cash equivalents in reserve.

We also see algorithmic stablecoins which are created by conversion another digital asset.

Whichever format is chosen, the goal is to reduce volatility thus offering a stable medium of exchange. For many, this is the essence of a payment system.

Stability is required for both collateralization along with commercial transactions.

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