Stablecoins: Definition and How They Work

We break down the different types of this emerging investment and explain its risks.

blockchain concept art
(Image credit: Getty Images)

Over the last few years, through surging market highs and painful downturns, stablecoins have become an integral part of both the DeFi and broader cryptocurrency ecosystems. With a total market cap of over $150 billion, stablecoins have drawn crypto novices and experienced investors alike, enthralled by their compelling value proposition: the stability of a traditional low-risk asset with the flexibility of a digital currency. But with the recent crash of the once-revered Terra ecosystem, stablecoins have found themselves under heavy scrutiny, with many investors looking for answers regarding their safety and utility.

What Is a Stablecoin?

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Randy Ginsburg
Contributing Writer, Kiplinger.com

Randy is a New York-based freelance writer and author covering the world of emerging technology and entrepreneurship. Deeply interested in the way technology will impact his grandkids' lives, Randy has been featured in several publications, including NFT Now, Forbes and Newsweek.