What Is a ‘Stablecoin’ and What Problem Does It Aim to Solve in Crypto?
A stablecoin is a type of cryptocurrency designed to have a stable value, typically pegged to a fiat currency like the US dollar, or backed by commodities or algorithms. They solve the problem of high volatility inherent in cryptocurrencies like Bitcoin, making them suitable for everyday transactions, lending, and use as collateral in DeFi.
Glossar
Stablecoin
Instrument ⎊ Stablecoin refers to a class of cryptocurrency designed to maintain a stable market value, typically pegged to a fiat currency, which is essential for collateralizing margin accounts and settling cash-settled options in the derivatives market.
Fiat Currency
Foundation ⎊ Fiat currency, within the context of cryptocurrency and derivatives, represents a governmental legal tender not backed by a physical commodity; its value is declared and maintained by the issuing nation’s regulatory framework, influencing the pricing and settlement of crypto-based financial instruments.
Cryptocurrency
Asset ⎊ Cryptocurrency, within the context of options trading and financial derivatives, represents a digitally native asset class exhibiting characteristics of both fiat currency and commodities, yet fundamentally distinct due to its cryptographic security and decentralized nature.