# What Are Stablecoins and How Do They Maintain Their Value? ⎊ Path

**Published:** 2025-12-04
**Author:** Greeks.live
**Categories:** Path

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## What Are Stablecoins and How Do They Maintain Their Value?

Stablecoins are cryptocurrencies designed to minimize price volatility by being pegged to a stable asset, most commonly the US dollar. They maintain their value through various mechanisms: being backed by fiat currency reserves (fiat-collateralized), backed by other cryptocurrencies (crypto-collateralized), or through algorithmic methods that automatically adjust supply and demand.

They bridge the gap between fiat and learn.

- [What Are Stablecoins and Why Are They a Common Diversification Asset for DAOs?](https://learn.greeks.live/path/what-are-stablecoins-and-why-are-they-a-common-diversification-asset-for-daos/)

- [What Are the Three Main Types of Stablecoins (Fiat-Backed, Crypto-Backed, Algorithmic)?](https://learn.greeks.live/path/what-are-the-three-main-types-of-stablecoins-fiat-backed-crypto-backed-algorithmic/)

- [What Is the Risk Profile of an Algorithmic Stablecoin versus a Fiat-Backed Stablecoin?](https://learn.greeks.live/path/what-is-the-risk-profile-of-an-algorithmic-stablecoin-versus-a-fiat-backed-stablecoin/)

- [How Does an Algorithmic Stablecoin Maintain Its Peg?](https://learn.greeks.live/path/how-does-an-algorithmic-stablecoin-maintain-its-peg/)

- [What Is the Difference between Circulating Supply and Total Supply in Crypto?](https://learn.greeks.live/path/what-is-the-difference-between-circulating-supply-and-total-supply-in-crypto/)

- [What Is a “Stablecoin” and How Is It Typically Regulated?](https://learn.greeks.live/path/what-is-a-stablecoin-and-how-is-it-typically-regulated/)

- [How Does a Crypto-Collateralized Stablecoin Handle Volatility?](https://learn.greeks.live/path/how-does-a-crypto-collateralized-stablecoin-handle-volatility/)

- [How Do Stablecoins Attempt to Mitigate the Volatility Inherent in Cryptocurrencies?](https://learn.greeks.live/path/how-do-stablecoins-attempt-to-mitigate-the-volatility-inherent-in-cryptocurrencies/)

## Glossar

### [Stablecoins](https://learn.greeks.live/area/stablecoins/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Peg ⎊ Stablecoins represent a class of cryptocurrencies engineered to maintain a stable value relative to a specified asset, typically a fiat currency like the US dollar.

### [Price Volatility](https://learn.greeks.live/area/price-volatility/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Dispersion ⎊ Price volatility within cryptocurrency, options, and derivatives markets represents the statistical degree to which asset prices deviate from their average over a defined period, reflecting inherent market uncertainty and risk.

## Discover More

### [What Is the Relationship between Inflation and the 'Seigniorage' Concept in Stablecoins?](https://learn.greeks.live/path/what-is-the-relationship-between-inflation-and-the-seigniorage-concept-in-stablecoins/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Relationship between Inflation and the 'Seigniorage' Concept in Stablecoins?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetric-Volatility-Surface-Contraction-Sculpting-Cryptographic-Digital-Asset-Hedging-Mechanisms.webp)

Seigniorage is the profit from issuing a stablecoin; excessive seigniorage can lead to hyperinflation of the stabilizing token.

### [What Is the Mathematical Relationship between Premium, Intrinsic Value, and Time Value?](https://learn.greeks.live/path/what-is-the-mathematical-relationship-between-premium-intrinsic-value-and-time-value/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Mathematical Relationship between Premium, Intrinsic Value, and Time Value?](https://learn.greeks.live/wp-content/uploads/2025/10/Bifurcated-Glass-Prisms-Reflecting-Volatility-Skew-in-Decentralized-Finance-Mechanisms.webp)

Option Premium = Intrinsic Value + Time Value.

### [How Do CEXs Incentivize Market Makers to Maintain Tight Spreads?](https://learn.greeks.live/path/how-do-cexs-incentivize-market-makers-to-maintain-tight-spreads/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do CEXs Incentivize Market Makers to Maintain Tight Spreads?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Representation-of-Quantum-Liquidity-Provision-in-Decentralized-Autonomous-Organization-Options-Clearing.webp)

CEXs use a "maker-taker" fee model, providing rebates to market makers for providing liquidity and narrowing the spread.

### [How Is 'Time Value' (Extrinsic Value) Calculated for an Option?](https://learn.greeks.live/path/how-is-time-value-extrinsic-value-calculated-for-an-option/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is 'Time Value' (Extrinsic Value) Calculated for an Option?](https://learn.greeks.live/wp-content/uploads/2025/10/Futuristic-Quantum-FinTech-Vehicle-Representing-Decentralized-Autonomous-Organization-Governance-Vector-Analysis.webp)

Time value is the total option premium minus its intrinsic value, representing the potential for favorable price movement before expiration.

### [What Are Zero-Knowledge Proofs and How Could They Potentially Offer a Faster Alternative to Commit-Reveal?](https://learn.greeks.live/path/what-are-zero-knowledge-proofs-and-how-could-they-potentially-offer-a-faster-alternative-to-commit-reveal/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are Zero-Knowledge Proofs and How Could They Potentially Offer a Faster Alternative to Commit-Reveal?](https://learn.greeks.live/wp-content/uploads/2025/10/Conceptualizing-Decentralized-Finance-Protocol-Governance-Through-Spherical-Derivative-Structures.webp)

ZKPs allow a trader to prove they have a valid transaction without revealing details, potentially eliminating the need for two slow on-chain steps.

### [What Is the Role of Session Keys in Symmetric Cryptography, and How Are They Used to Secure a Single Financial Transaction?](https://learn.greeks.live/path/what-is-the-role-of-session-keys-in-symmetric-cryptography-and-how-are-they-used-to-secure-a-single-financial-transaction/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Role of Session Keys in Symmetric Cryptography, and How Are They Used to Secure a Single Financial Transaction?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Analysis-of-Interlocking-Legacy-Hardware-Components-Representing-Digital-Asset-Infrastructure-Opacity.webp)

A session key is a one-time-use symmetric key that is used to secure a single financial transaction, and is then thrown away.

### [What Are Security Token Exchanges and How Do They Operate?](https://learn.greeks.live/path/what-are-security-token-exchanges-and-how-do-they-operate/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are Security Token Exchanges and How Do They Operate?](https://learn.greeks.live/wp-content/uploads/2025/10/Teardrop-Encapsulated-Algorithmic-Trading-Module-Representing-Decentralized-Finance-Option-Settlement-Mechanisms.webp)

Security token exchanges are regulated platforms for secondary trading of tokenized securities, enforcing compliance via smart contracts.

### [In a Proof-of-Stake System, What Is the Equivalent of a "Miner" and How Do They Benefit from Front-Running?](https://learn.greeks.live/path/in-a-proof-of-stake-system-what-is-the-equivalent-of-a-miner-and-how-do-they-benefit-from-front-running/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![In a Proof-of-Stake System, What Is the Equivalent of a "Miner" and How Do They Benefit from Front-Running?](https://learn.greeks.live/wp-content/uploads/2025/10/Modular-Digital-Asset-Custody-Casing-Illuminating-Inner-Turquoise-Indicator-For-Crypto-Derivates-Settlement.webp)

The validator is the PoS equivalent of a miner, and they profit from front-running by ordering transactions to capture arbitrage opportunities and priority fees.

### [What Are "Vesting Schedules" and How Do They Impact the Distribution of Governance Tokens?](https://learn.greeks.live/path/what-are-vesting-schedules-and-how-do-they-impact-the-distribution-of-governance-tokens/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are "Vesting Schedules" and How Do They Impact the Distribution of Governance Tokens?](https://learn.greeks.live/wp-content/uploads/2025/10/Streamlined-Aerodynamic-Finial-Detailing-Reflecting-Liquidity-Pool-Efficiency-in-Decentralized-Finance.webp)

Contracts that release tokens to insiders over time, preventing a sudden price crash and promoting gradual decentralization of governance power.

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**Original URL:** https://learn.greeks.live/learn/what-are-stablecoins-and-how-do-they-maintain-their-value/
