⚖️ Stablecoin Pegs: How $1 Stays $1
Learn how USDC, DAI, and USDT maintain their dollar peg
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0 / 5 completed⚖️ Stablecoin Peg Mechanics
Stablecoins aim to maintain a stable value (usually $1.00) despite crypto market volatility. Understanding how different types maintain their peg is crucial for assessing risk and choosing the right stablecoin for your needs.
🎮 Interactive: Stablecoin Types
Explore how different stablecoin types maintain their $1.00 peg:
Fiat-Collateralized
Each stablecoin is backed by $1 held in bank accounts or securities
Mechanism
Reserve backing + redemption guarantee
Examples
✓ Advantages
- • Simple and proven model
- • High stability (±0.1% from peg)
- • Easy to understand
- • Quick redemption
✗ Disadvantages
- • Requires trust in issuer
- • Centralized custody risk
- • Regulatory exposure
- • Banking dependencies
Why Stablecoins Matter
Trading & Liquidity
Stablecoins serve as the primary trading pair for crypto assets. They allow traders to exit volatile positions without converting back to fiat, providing crucial liquidity across all DeFi protocols.
Payments & Transfers
Enable fast, cheap cross-border payments with price certainty. No more worrying about BTC dropping 10% while your transaction confirms. Instant settlement with predictable value.
DeFi Building Block
Foundation of lending, borrowing, and yield farming. Stablecoins allow you to earn yield on "cash-like" assets without exposure to crypto volatility. Critical for protocol stability.
Financial Access
Provide dollar access to anyone with internet, bypassing banking systems. Crucial in countries with currency instability or restricted banking access. True financial inclusion.
The Stablecoin Trilemma
Like blockchain's trilemma, stablecoins face three competing goals:
- 1.Price Stability: Maintain tight peg to $1.00 (±0.1%)
- 2.Decentralization: No single point of failure or control
- 3.Capital Efficiency: Minimal collateral requirements
Most stablecoins optimize for 2 of 3: USDC (stability + efficiency), DAI (stability + decentralization), algorithmic attempts (efficiency + decentralization) often fail on stability.