Token Guides5 min read
The Complete Guide to Stablecoins in DeFi
Understand the different types of stablecoins, their mechanisms, risks, and how to use them effectively.
What Are Stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to a fiat currency like the US dollar. They serve as the bridge between traditional finance and crypto.
Types of Stablecoins
- Fiat-backed (USDC, USDT): Backed by real dollars/treasuries
- Crypto-backed (DAI): Over-collateralized by crypto assets
- Algorithmic (FRAX): Use algorithmic mechanisms to maintain peg
- RWA-backed (USDM): Backed by real-world assets like T-bills
Key Stablecoins
- USDT: Largest by market cap and volume
- USDC: Most transparent and regulated
- DAI: Decentralized, crypto-collateralized
- FRAX: Fractional-algorithmic hybrid
Risks
- De-peg risk: USDC briefly lost its peg during the SVB crisis
- Regulatory risk: Increasing government scrutiny worldwide
- Smart contract risk: For on-chain stablecoins
- Centralization risk: Issuers can freeze specific addresses
Using Stablecoins on Alkizen
Swap between stablecoins across chains with minimal slippage through Alkizen's optimized routing.