Stablecoin

A stablecoin (in German, stabile Münze) refers to a cryptocurrency that, by definition, should always represent a constant value.

What is a Stablecoin?

A stablecoin is therefore a cryptocurrency that has, for example, the value of a fiat currency such as the US dollar. There are various ways to keep the value of a stablecoin stable.

• Coverage by the fiat currency: For every coin of the cryptocurrency, the fiat currency is deposited in real terms. This means that the stablecoin is covered 1:1 by the underlying fiat currency.
• Coverage by other assets: Another possibility is that the stablecoin is covered by other assets that are intended to keep the value of the coin stable. For example, a stablecoin can represent the value of an ounce of gold or a Bitcoin and be covered by this asset.
• Algorithmic stablecoins: Here, the value of the stablecoin is maintained by an algorithm. However, there are currently no major stablecoins where this has been successfully implemented. The largest algorithmic stablecoin was TerraUSD, which failed with the start of the crypto winter in 2022.