A stablecoin is a digital currency designed to maintain a stable value, typically pegged 1:1 to a fiat currency like the US Dollar. Unlike volatile cryptocurrencies like Bitcoin, stablecoins combine the programmability of blockchain with the price stability of traditional money.
The stablecoin market has grown to over $150 billion in total value, with daily transaction volumes exceeding traditional payment networks like Visa. This guide covers everything you need to know about stablecoins.
The Landscape of Digital Money
Before diving into stablecoins specifically, it's important to understand where they fit in the broader landscape of digital money. There are three main categories:
Stablecoins
Digital tokens issued by private companies, pegged to fiat currencies. Examples include USDT (Tether), USDC (Circle), and EURC. They operate on public blockchains like Ethereum, Solana, and Tron.
Central Bank Digital Currencies (CBDCs)
Digital currencies issued directly by central banks. Examples include China's Digital Yuan (e-CNY), the Bahamas' Sand Dollar, and Nigeria's eNaira. Over 130 countries are exploring CBDCs.
Tokenized Deposits
Bank deposits represented as tokens on a blockchain. JPMorgan's JPM Coin and similar initiatives allow banks to move money faster using blockchain rails while maintaining traditional banking relationships.
How Stablecoins Maintain Their Peg
Different stablecoins use different mechanisms to maintain their 1:1 peg with fiat currencies:
Fiat-Backed (Most Common)
For every stablecoin in circulation, the issuer holds $1 in reserves (cash, Treasury bills, or other liquid assets). USDT and USDC use this model. Users can redeem stablecoins for actual dollars.
Examples: USDT, USDC, EURC, PYUSD
Crypto-Collateralized
Backed by other cryptocurrencies, typically over-collateralized (e.g., $150 of ETH backing $100 of stablecoin). Smart contracts automatically liquidate collateral if it falls below threshold.
Examples: DAI, LUSD, sUSD
Algorithmic (Higher Risk)
Use algorithms and market incentives to maintain the peg without full collateral backing. These have historically been riskier—TerraUSD's collapse in 2022 wiped out $40 billion.
Examples: FRAX (partially), historical: UST
Major Stablecoins by Market Cap
| Stablecoin | Issuer | Market Cap | Backing |
|---|---|---|---|
| USDT (Tether) | Tether Limited | ~$95B | Cash, T-Bills, Commercial Paper |
| USDC | Circle | ~$25B | Cash, US Treasuries |
| DAI | MakerDAO | ~$5B | Crypto + Real World Assets |
| PYUSD | PayPal/Paxos | ~$500M | Cash, US Treasuries |
Stablecoins vs CBDCs: Key Differences
| Aspect | Stablecoins | CBDCs |
|---|---|---|
| Issuer | Private companies | Central banks |
| Network | Public blockchains | Permissioned/private |
| Global Access | Anyone with internet | Usually domestic only |
| Privacy | Pseudonymous | Full government visibility |
| Programmability | Full smart contract support | Limited/controlled |
Why Moneta Uses Stablecoins
Moneta is built on stablecoins because they offer the best combination of:
Global Accessibility
Anyone can use them, anywhere in the world
Price Stability
No volatility risk for merchants or customers
Instant Settlement
Transactions confirm in seconds, 24/7
Self-Custody
Users control their own funds, not a third party
Explore 400+ Stablecoins
Want to explore the full landscape of stablecoins? Visit our comprehensive directory at effex.cx where we analyze 400+ stablecoins with detailed information about every issuer, their regulatory status, backing type, and more.
Ready to Start Using Stablecoins?
Learn more about how stablecoins can benefit your business or start accepting payments today.