Stablecoins Explained: What They Are, How They Work, and Where to Use Them

When you hear stablecoins, cryptocurrency tokens designed to maintain a stable value by being pegged to assets like the US dollar. Also known as pegged tokens, they let you hold digital money without watching your balance swing 20% in a day. That’s the whole point. Unlike Bitcoin or Ethereum, stablecoins don’t try to be investments—they’re meant to be digital cash you can use on exchanges, in DeFi, or to send across borders without bank delays.

Most stablecoins like USD Coin, a fully backed digital dollar issued by Circle and Coinbase or Tether, the oldest and most traded stablecoin, often tied to the US dollar hold real dollars in reserve. If you have 10 USDC, you should be able to redeem it for $10 anytime. But not all are this simple. Some use algorithms or crypto collateral, and those can break—like TerraUSD in 2022. That’s why you need to know who backs them, how often they’re audited, and whether they’re actually liquid.

Stablecoins are the backbone of DeFi. You can lend them on platforms like Venus Protocol to earn interest, use them as collateral to borrow other coins, or swap them on DEXs like PancakeSwap without losing value to volatility. They’re also how people in countries with unstable currencies—like Pakistan or Cuba—keep savings safe and get paid for freelance work. But they’re not magic. If the issuer goes under, or if regulators shut them down, your stablecoin could lose its peg. That’s why some traders only use them to move in and out of riskier assets quickly—not to hold long-term.

You’ll see stablecoins pop up everywhere in these posts: from Venus BTC (vBTC) on BNB Chain, which lets you earn yield on Bitcoin by turning it into a receipt token, to liquidity mining pools on Curve Finance where stablecoin pairs earn steady returns. You’ll also find warnings—like with fake airdrops tied to CHY or THN tokens—that pretend to offer free stablecoins but are just traps. Some exchanges, like SATOS in the Netherlands, even require you to use stablecoins for compliance. And yes, even privacy coins like Secret (SCRT) can interact with stablecoins in encrypted DeFi apps.

So whether you’re trading on a DEX, trying to avoid crypto’s wild swings, or just sending money across borders, stablecoins are the quiet workhorses of the crypto world. But they’re not risk-free. Know the difference between a backed stablecoin and a shaky algorithmic one. Check who’s issuing it. And never assume it’s as safe as your bank account—because it’s not.