What is a Stablecoin?

A Stablecoin is a cryptocurrency designed to maintain the same value (or be pegged to) as a "stable" currency, such as USD. Typically backed by another asset or set of assets whose value equals or exceeds the value of the pegged currency, stablecoins are subject to the volatility of their backing asset.

One of the most popular stablecoins, DAI, is backed by multiple cryptocurrencies, including ETH and BAT. As a result, DAI must be overcollateralized by at least 150% of the backed asset at all times.

USDC is backed by a company that holds one actual dollar for every USDC minted, so it is more capital efficient at the cost of being centralized and, therefore, subject to compromise by a bad actor in the company which backs it.