Stablecoins Explained: How They Work, Why They Matter, and What You Need to Know

When you buy crypto, you don’t want your money to drop 20% in an hour just because the market panicked. That’s where stablecoins, cryptocurrencies designed to hold steady value by pegging to real-world assets like the US dollar. Also known as fiat-backed crypto, they let you hold digital money without the rollercoaster. Think of them as the bridge between volatile crypto and the stable, familiar value of dollars, euros, or other government currencies.

Not all stablecoins work the same way. Some, like USDT (Tether, the oldest and most traded stablecoin, backed by reserves including cash and short-term bonds), claim to hold real money in a bank for every coin issued. Others, like USDC (Circle’s transparent, regulated stablecoin fully backed by U.S. dollars held in FDIC-insured banks), are more open about their audits. Then there are algorithmic stablecoins—ones that try to stay stable using code and supply changes, not cash reserves. Those have failed before, like TerraUSD in 2022, when the algorithm couldn’t handle a run on the coin and it dropped to pennies. That’s why most smart traders stick to the ones backed by real assets.

Stablecoins aren’t just for holding value. They’re the backbone of DeFi. If you’re lending, borrowing, or trading on a decentralized exchange, you’re probably using a stablecoin to avoid getting wiped out by price swings. They’re also used for cross-border payments, remittances, and even paying freelancers in countries with unstable local currencies. You don’t need a bank account to send USDC to someone in Nigeria or Argentina—just a wallet and internet.

But here’s the catch: not every stablecoin is trustworthy. Some claim to be backed by dollars but hide their reserves. Others rely on risky assets like corporate bonds or crypto collateral. That’s why you need to check who’s behind it, whether they publish regular audits, and where the money actually is. The ones you see in most crypto exchanges—USDT, USDC, DAI—are the ones with the most track record. The rest? Treat them like a gamble.

Below, you’ll find real-world breakdowns of crypto projects that either tried to build stablecoins, got tangled in regulation, or ended up as cautionary tales. Some are abandoned coins with no backing. Others are exchanges where stablecoins are traded but security is questionable. You’ll learn what to look for—and what to walk away from.