A stablecoin is a digitally native medium of exchange that seeks to maintain a stable relative value. A type of cryptocurrency, a stablecoin is designed to achieve price stability through linking its market value to a reference asset, most often the US dollar. By linking or “pegging” to this more stable reference asset, the stablecoin can then be used in scenarios where price stability is the primary objective, such as for peer-to-peer or cross-border payments, in the on-chain trading of other digital assets, and in collateralized lending and other DeFi services.

However, while all stablecoins offer the promise of stability in price, not all are able to achieve this outcome.

Stablecoins generally fall into two broad categories: custodial and non-custodial (or “decentralized”). Each broad category can also have sub-categories.

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