Stablecoins maintain a steady value pegged to assets like the US dollar. They’re essential tools in DeFi for trading, earning yield, and avoiding volatility.
Types of Stablecoins
Fiat-backed: USDC and USDT are backed by real dollars in bank accounts. Crypto-backed: DAI is backed by overcollateralized crypto deposits. Algorithmic: Use smart contracts to maintain the peg (higher risk).
Popular Stablecoins
- USDC: Regulated, transparent reserves, widely accepted
- USDT: Largest by market cap, most liquid
- DAI: Decentralized, crypto-collateralized
- FRAX: Partially algorithmic hybrid model
Using Stablecoins in DeFi
Stablecoins are perfect for yield farming, providing liquidity, and parking funds during market uncertainty. They earn higher yields than traditional savings while avoiding crypto volatility.