What is a Stablecoin and How Does It Work?
💰 A Stablecoin is a type of cryptocurrency designed to keep its price stable, unlike other volatile crypto coins.
📌 Most stablecoins are pegged to $1 USD.
⚙️ How does a Stablecoin work?
Stablecoins maintain stability by being backed or controlled in different ways:
1️⃣ Fiat-backed Stablecoins
➡️ Example: USDT, USDC
➡️ 1 coin is backed by 1 USD or equivalent reserves
2️⃣ Crypto-backed Stablecoins
➡️ Example: DAI
➡️ Backed by other cryptocurrencies as collateral
3️⃣ Algorithmic Stablecoins
➡️ Use smart algorithms to control supply & demand
✅ Why are Stablecoins used?
✔️ Protect funds during market crashes
✔️ Store trading profits safely
✔️ Fast transfers without banks
✔️ Easy entry & exit in crypto trading
⚠️ Things to remember
❌ Not completely risk-free
❌ Transparency & reserves matter
💡 Popular Stablecoins:
USDT | USDC | DAI | BUSD (legacy)
📌 Not Financial Advice
