The crypto market is known for volatility—token prices can swing within hours. For people who want to hold value digitally without sharp price moves, stablecoins emerged: cryptocurrencies designed to track a reference asset such as a fiat currency.

What is a stablecoin

A stablecoin is a digital token whose value is maintained at a target level, most often 1 US dollar (less often the euro, gold, or a basket of assets). The goal is to preserve price stability and serve as a bridge between fiat money and cryptocurrencies.

Example: 1 USDT aims to be worth 1 USD. This makes stablecoins useful for payments, transfers, and holding funds without worrying about sudden price drops.

How stablecoins are collateralized

A stablecoin’s stability comes from its backing model—what stands behind the token and supports its peg. The main approaches are:

  1. Fiat-backed. Issuers hold reserves in traditional currencies (USD, EUR, JPY) at banks or custodians. Examples: USDT (Tether), USDC (USD Coin), BUSD (Binance USD).
  2. Crypto-backed. Other cryptocurrencies (e.g., ETH, TRX) are locked as collateral in smart contracts. To withstand market drops, these systems are typically over-collateralized. Example: DAI by MakerDAO.
  3. Algorithmic. No direct reserves; algorithms expand or contract supply to keep the peg. The well-known case is UST (TerraUSD), which also highlighted the risks of this approach.

The most popular stablecoins

  1. USDT (Tether) — the oldest and most widely used stablecoin, with market cap exceeding $100B. Issued on many networks, including Ethereum, TRON, and BNB Chain; widely used for trading and transfers.
  2. USDC (USD Coin) — issued by Circle with Coinbase participation; known for transparency with regular reserve attestations; common on exchanges and in DeFi.
  3. DAI — a decentralized stablecoin on Ethereum from the MakerDAO protocol, backed by crypto collateral rather than a centralized issuer.
  4. TUSD (TrueUSD) — another fiat-backed stablecoin, audited by independent firms.
  5. BUSD — previously issued in partnership with Binance and Paxos; the project has been wound down since 2024, though some users still hold balances.

The role of stablecoins in the crypto ecosystem

Stablecoins are central to the digital economy. They provide exchange liquidity, streamline cross-border transfers, and are embedded in smart contracts. Users can move value between platforms without repeatedly converting to fiat.

For example, USDT on TRON (TRC-20) offers very low fees and near-instant confirmations, which is why TRC-20 USDT has become a de-facto standard for everyday settlements in many crypto workflows.

Advantages and risks

Advantages

  • Price stability that reduces volatility exposure
  • High speed and low fees
  • Easy integration with DeFi and crypto services
  • Convenience for international payments

Risks

  • Issuer dependence in centralized models
  • Regulatory uncertainty in some jurisdictions
  • Smart-contract risks for systems relying on on-chain collateral and logic

Conclusion

Stablecoins have become a key component of crypto infrastructure, combining blockchain advantages with fiat-like stability. Leading options—USDT, USDC, and DAI—serve as base currencies for settlements, trading, and DeFi apps.

The market keeps evolving as projects search for a balance between transparency, decentralization, and stability. Which tokens lead tomorrow will largely depend on how well they strike that balance.

FAQ

  1. What makes stablecoins “stable”?

    A peg to a reference asset (commonly the US dollar) maintained through reserves (fiat in banks), crypto collateral, or supply-adjusting algorithms—depending on the model.

  2. How are stablecoins different from regular cryptocurrencies?

    They aim to avoid high volatility. While BTC or ETH can move by double-digit percentages in a day, stablecoins typically hold near $1, making them practical for payments and parking funds.

  3. Can you earn yield with stablecoins?

    Yes. They’re used in staking programs, DeFi protocols, and lending platforms that pay interest for deposits or liquidity provision. Returns come with risks tied to protocol design and counterparties.

  4. Which network is best for holding stablecoins?

    For everyday transfers, TRON (TRC-20) is popular thanks to low fees and speed. Ultimately, choose the networks your wallet and counterparties support.

  5. Can issuers be trusted completely?

    No system is risk-free. Even large issuers face regulatory scrutiny. Prefer reputable, transparent projects that publish reserve reports and undergo audits.

  6. What happens if a stablecoin loses its dollar peg?

    De-pegs have happened (e.g., UST in 2022) and can trigger sharp price declines. Many users mitigate this by favoring large, well-collateralized, and transparent stablecoins.

  7. Are stablecoins suitable for cross-border payments?

    Yes—this is a major use case. A TRON USDT transfer settles in seconds at a fraction of a cent, often far cheaper and faster than bank wires.