Stablecoin is essentially a kind of cryptocurrency based on blockchain technology. It has the characteristics of peer-to-peer transactions and immutability. At the same time, it is relatively stable because its value is anchored to various legal currencies (or a basket of currencies).

Stablecoins are generally issued by the private sector, such as USDT issued by Tether and USDC issued by Circle, which are currently the largest stablecoins with a 1:1 anchoring mechanism to the US dollar.

Stablecoins are different from the Bitcoin we are familiar with. Their value mainly comes from the anchored assets rather than from mathematical scarcity. In addition, unlike Bitcoin’s extremely high volatility, the value of stablecoins is extremely stable and has extremely low volatility.

Stablecoins can be divided into many types according to different categories. For example, according to the different anchored assets, they can be divided into: stablecoins based on fiat currencies (such as the US dollar), stablecoins based on physical assets (such as gold), stablecoins based on digital assets (such as Ethereum), and stablecoins based on algorithms.

According to whether it is decentralized, it can be divided into: centralized stablecoins and decentralized stablecoins. The so-called centralization refers to a fixed issuing agency. Centralized stablecoins are usually issued by companies or institutions, relying on their resource integration and credit endorsement to ensure the stability of the stablecoin value. Decentralized stablecoins rely on smart contracts and blockchain technology to achieve community autonomy and give users higher transparency and autonomy. The classification of stablecoins is as shown in the following framework: