What is a stablecoin (USDT, USDC, DAI) and what is it for?

A stablecoin is a cryptocurrency designed so its price does not move: it almost always aims to be worth one US dollar. It is how you hold "dollars" inside the crypto world without the roller coaster of bitcoin or ether.

What they are used for

• A temporary safe spot: sell a volatile coin and park the value in something stable without cashing out to a bank.
• Sending money across borders: transfers arrive in minutes, any day, any hour, with low fees.
• Saving in dollars in countries with high inflation or limits on buying foreign currency.
• The base of crypto trading: most exchange pairs are quoted against USDT or USDC.

How they hold their value

There are three main families:

Reserve-backed

A company takes in dollars and issues the same number of tokens, holding reserves in cash, Treasury bills or other assets. Redeem the token and you get the dollar back. That is how USDT (Tether) and USDC (Circle) work. Their main risk is trust: you rely on the company actually holding those reserves and on its banks working.

Crypto-backed

There is no company with bank accounts: tokens are created by locking other cryptocurrencies as collateral in smart contracts, always worth more than what is issued. DAI is the classic example. Its risk is that a sharp crash in the collateral can be hard to absorb.

Algorithmic

They try to hold the price with automatic rules alone, without full reserves. History has not been kind to them: in 2022, TerraUSD (UST) lost its value within days and wiped out billions of dollars. Be very skeptical of any "stablecoin" promising high yields without explaining where they come from.

The network matters: the most expensive mistake

The same stablecoin exists on several blockchains: USDT circulates on Ethereum, Tron, Solana and others. When sending, sender and receiver must use the same network. Send USDT over Tron to an address that only expects Ethereum and the funds may become inaccessible. Before every transfer, check the network on both sides and send a small test amount first.

Are they always worth exactly one dollar?

Not always. Under stress they can drift a few cents, or more if there are doubts about reserves: in March 2023, USDC fell to around $0.88 for a few hours when a bank holding part of Circle's reserves failed, and later recovered. "Stable" does not mean "risk-free".

Compare their live prices in the cryptocurrency table or convert them into your currency with the converter.