Stablecoin
Stablecoin is designed to maintain stable value by pegging to fiat currencies, commodities, or algorithms to minimize volatility.
What is Stablecoin?
A stablecoin is designed to maintain a stable value by pegging to assets like fiat currency (e.g., USD) or commodities(e.g., gold), to minimize volatility for payments, decentralized finance (DeFi), and cross-border transfers. Stablecoin types include fiat-backed (e.g., USDT and USDC, supported by reserves), crypto-backed (over-collateralized), and algorithmic.
In 2025, in the U.S., the GENIUS Act (Guiding Effective Non-Fiat Innovation and Utility for Stablecoins) was passed to establish a tailored regulatory framework for stablecoins. It emphasizing consumer protection, reserve transparency, and financial stability to foster innovation while mitigating risks like de-pegging.
Related Terms
Sequencer of Layer 2
A program or node in a Layer 2 or Rollup blockchain network that orders transactions before they are processed or submitted to the Layer 1 blockchain.
Ledger
An immutable, distributed digital record of transactions maintained across network nodes.
Active Management Burden
The ongoing requirement for liquidity providers to monitor and adjust positions in DeFi to optimize returns and mitigate risks.
Execution Layer
The protocol layer responsible for processing transactions and executing smart contracts in a blockchain network.
Impermanent Loss(IL)
The unrealized financial loss experienced by a liquidity provider in a decentralized exchange (DEX) trading pair when the price of one token diverges significantly from the other, compared to holding the tokens outright.
IOSCO Stablecoin Rules
International Organization of Securities Commissions' Standards applying securities regulations to stablecoins for investor protection and market integrity.