Stablecoin

A cryptocurrency that holds a relatively stable value (similar to a US dollar) over time. Even large-cap cryptocurrencies such as Bitcoin can experience significant price swings in a day. Consequently, many believe this volatility means they are too unpredictable for everyday payments and transactions. Stablecoins are designed to minimize price volatility through being pegged to an external reference, such as cryptocurrency, fiat money (U.S. Dollar, Euro), or exchange-traded commodities (gold, silver). This stability is achieved via collateralization through algorithmic mechanisms of exchanging the asset or a derivative of the asset by which the stablecoin is backed. Stablecoins have gained popularity in the last couple years as they offer the best of both worlds: Instant processing and security of cryptocurrency payments, and volatility-free valuations of fiat currencies.