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Foundations / Explained visually
Stable does not mean risk-free
What stablecoins are, why people use them, and the risks beginners should understand.
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The idea,
in words.
A target value
A stablecoin aims to track another asset, often the US dollar. The target is a design goal, not a guarantee.
Ask what supports it
Some use reserves managed by an issuer. Others use crypto collateral or different mechanisms. Their risks are not interchangeable.
A peg can break
Weak reserves, redemption problems or software failures can disrupt the peg. Some issuers can also freeze tokens.
Trace the whole route
Before using one, check the issuer, the supported network and how you can redeem or sell it. Stablecoins are not automatically equivalent to insured bank deposits.