These are crypto currencies whose price is designed to be fixed or equal to other crypto-currency, fiat money or commodities for example precious metals price.

There are various types of stable coins

  • Backed: by commodities (DGX), by fiat (TUSD, USDT) or by other cryptocurrencies (nUSD, DAI-MAKERDAO)
  • Non-backed: they use algorithms to control the stable coin money supply (Basis), these are also called seignorage stable coins, their main objective is to have a value close to 1USD.

For example an specific description on how USDT works: “Tether tokens exist as digital tokens built on bitcoin (Omni and Liquid Protocol), Ethereum, EOS, Tron, Algorand, SLP and OMG blockchains. These transport protocols consist of open source software that interface with blockchains to allow for the issuance and redemption of cryptocurrency tokens, in our case, “Tether tokens.” Tether Platform currencies are 100% backed by Tether’s reserves. Tether tokens are redeemable and exchangeable pursuant to Tether Limited’s terms of service. The conversion rate is 1 Tether USDT token (USDT) equals 1 USD.”