Stablecoin is essentially a cryptocurrency pegged to fiat currency (mainly the US dollar), aiming to maintain a stable value of approximately 1 coin ≈ 1 USD, serving as a "safe haven" and "transaction medium" in the crypto world.

1. How does it stay "stable"?

Primarily relies on backing collateral or mechanisms, divided into three categories:

Fiat-collateralized (mainstream): such as USDT, USDC. The issuer deposits an equivalent amount of USD or US Treasuries in a bank as reserves. This is currently the most mainstream and liquid form.

Crypto-collateralized: such as DAI. Users deposit over-collateralized other cryptocurrencies (like ETH) as collateral, and the system generates stablecoins through "over-collateralization" to counteract volatility.

Algorithmic (high risk): such as the former UST. No physical collateral, relying solely on algorithms and arbitrage mechanisms to regulate supply and demand. These coins are highly susceptible to de-pegging and zeroing out in extreme market conditions (e.g., LUNA collapse). They carry very high risk, and ordinary users should avoid them.

2. Why is the crypto industry inseparable from stablecoins?

Trading valuation: BTC/USDT is the standard trading pair on exchanges, using stablecoins for valuation to avoid regulatory issues associated with directly using fiat currency.

Hedging tool: When anticipating a market downturn, investors convert BTC/ETH into USDT or USDC to "lock in" their market value and avoid sharp declines.

DeFi fuel: It is the core asset for borrowing and earning interest in decentralized finance (DeFi).

3. How to choose between USDT and USDC?

USDT (Tether): The king of liquidity. The largest market cap, supported by almost all exchanges, with low transfer fees (especially on TRC-20 chain) and fast transaction speeds. The downside is that the transparency of the issuer's reserves has been controversial, and compliance is somewhat weaker.

USDC (USD Coin): The compliance benchmark. Issued by licensed US-based company Circle, with monthly audits of reserves (cash + US Treasuries) by accounting firms, offering high transparency. Suitable for institutions and long-term holders who prioritize security and compliance.

⚠️ Risk Warning:

De-pegging risk: Even USDT/USDC has experienced brief dips below $1 due to bank runs or banking risks in the past.

Regulatory risk: If the stablecoin issuer faces regulatory investigations, it may impact redemption channels.

On-chain risk: Sending assets to the wrong chain or encountering phishing contracts can lead to permanent asset loss.

For ordinary users: Use USDT for daily transactions (be sure to choose the correct TRC-20 or ERC-20 network), and for large amounts or long-term storage, prioritize USDC. Absolutely avoid any algorithmic stablecoins. #Gate广场四月发帖挑战