Stablecoins play an essential role in the cryptocurrency ecosystem. They offer a sense of stability in a space often marked by sharp price swings and also present advantages over traditional fiat currencies. With the global crypto market now valued at more than $3.5 trillion, stablecoins like USD Coin (USDC) are becoming central to everything from payments and decentralized finance (DeFi) to promoting financial inclusion.
This article explores 8 critical aspects of stablecoins. It breaks down their definition, explains why they are needed alongside Bitcoin and fiat currencies like the USD, highlights their benefits, and provides a current list of major stablecoins.
1. What Are Stablecoins, and How Do They Maintain Stability?
Stablecoins are cryptocurrencies designed to keep a consistent value by being tied to traditional assets like the U.S. dollar, the euro, gold, or even other cryptocurrencies. Unlike Bitcoin, which saw a 15% price drop in a recent month according to CoinGecko, stablecoins such as Tether (USDT) and USDC are pegged 1:1 to the U.S. dollar, meaning that 1 USDC is roughly equal to $1. These digital assets blend the benefits of blockchain technology with the reliability of traditional currencies, making them suitable for daily transactions, savings, and DeFi use.
They maintain their stability using different methods. Fiat-backed stablecoins, like USDC, hold reserves in actual U.S. dollars stored in audited bank accounts. Crypto-backed stablecoins, such as DAI, are supported by extra collateral in cryptocurrencies like Ethereum, managed by smart contracts. Then there are algorithmic stablecoins like Ethena USDe, which use automatic supply adjustments to keep their value stable. Together, these mechanisms help stablecoins stand apart from Bitcoin’s unpredictability and fiat’s slower systems.
2. Why Are Stablecoins Necessary When Bitcoin and USD Exist?
Stablecoins fill in the gaps left by both Bitcoin and traditional currencies like the USD. While Bitcoin is a revolutionary asset, its price often swings by 12% to 18% within a single month. This makes it unreliable for everyday purchases. For example, it recently dropped 15% in one month. Stablecoins, like USDC, stay steady at $1, enabling dependable payments. In fact, stablecoins handled $27.6 trillion in transactions last year, surpassing Visa and Mastercard combined, according to Chainalysis.
Bitcoin also falls short in cross-border payments, where transaction fees can spike to $10 or even $50, and confirmation times are slow. USDC, on networks like Solana, processes transfers for less than a cent and in just seconds. In countries like Nigeria and India, where remittances are crucial, usage of stablecoins has surged by 200%, showcasing their value where Bitcoin cannot compete.
When compared to USD, bank transfers can take 1 to 5 days and cost $10 to $40. Stablecoins settle in seconds and cost much less. In regions like Turkey, where the lira dropped 28% in value, access to U.S. dollars is limited. However, people are using stablecoins instead. In Turkey alone, stablecoin activity now makes up 4.5% of the country’s GDP. While banks are only open during set hours, stablecoins work 24/7.
Additionally, U.S. dollars cannot be used in DeFi platforms that offer returns of 5% to 10%, but stablecoins like USDC are at the heart of DeFi’s $2.5 trillion total value locked. Traders also use stablecoins as a safe zone during market downturns to preserve their capital without moving back to fiat. In short, stablecoins go beyond what Bitcoin and USD offer by delivering speed, stability, and ease of use.
3. How Do Stablecoins Differ from Bitcoin and USD?
Each of these—stablecoins, Bitcoin, and USD—plays a unique role in the world of finance. Stablecoins such as USDC keep a steady value of $1 and avoid the 10% to 20% swings seen in Bitcoin, which recently dropped 15% in one month. While Bitcoin, with a market cap of $1.2 trillion, is mainly used as a store of value or speculative asset, and USD is backed by government institutions, stablecoins operate on blockchain and are built for real-world applications like payments and remittances.
Their technical designs also differ. USDC keeps U.S. dollar reserves in audited accounts. DAI uses other cryptocurrencies as collateral. Ethena USDe controls supply through algorithms. Bitcoin’s price is driven by market demand and supply, and USD depends on the central banking system. Transaction costs also set them apart. Bitcoin fees range from $1 to $50 and can take time to confirm. USD transfers via banks can cost $10 to $40 and take days. On the other hand, USDC on Solana settles almost instantly for less than a cent.
Access is another key factor. Traditional banking is required to use USD, which leaves many people out—especially in underserved areas. Stablecoins are available globally, around the clock, with just a smartphone and internet access. They blend Bitcoin’s innovation with the reliability of the dollar, offering something more practical and inclusive.
4. What Types of Stablecoins Are Available?
Stablecoins fall into four major types, each using a different method to keep their value stable. Fiat-backed stablecoins like USDC and USDT are tied to the U.S. dollar or euro and supported by reserves in bank accounts. They’re centralized and reliable for everyday payments and trading.
Crypto-backed stablecoins, such as DAI, are pegged to the dollar but supported by cryptocurrency like Ethereum. These rely on decentralized smart contracts and are popular in DeFi.
Commodity-backed stablecoins are tied to assets like gold or silver. Examples include Tether Gold (XAUt), which appeals to investors who want digital access to physical commodities.
Algorithmic stablecoins like Ethena USDe adjust their supply using software rules rather than backing assets. They carry more risk, as seen in TerraUSD’s $45 billion collapse a few years ago. Still, each type offers unique advantages, from handling remittances to powering decentralized finance.
5. What Is the Current State of the Stablecoin Market?
Today, stablecoins have become a significant part of the cryptocurrency landscape. According to recent data from CoinGecko, they have a combined market cap of $254 billion, making up 7.1% of the total $3.5 trillion crypto market—a 60% increase from the year before.
Tether (USDT) leads the pack with $157.6 billion, followed by USDC at $61 billion. Together, they represent over 90% of the stablecoin market. Growth is especially strong in developing nations, where local currencies struggle and access to U.S. dollars is limited. In Turkey, for instance, stablecoin activity makes up 4.5% of GDP, and Nigeria has seen usage grow by 200%, driven by the depreciation of the local currency.
New U.S. laws like the GENIUS Act are adding credibility to the market by requiring more transparency. USDC benefits from these regulations due to its frequent audits, while USDT faces criticism for a lack of financial clarity. Still, stablecoins are not without issues. Chainalysis reports that they accounted for $24 billion—or 60%—of all crypto-related illicit transactions last year. On X, users note that USDT dominates in Asia, USDC is preferred in the U.S., and banks such as Citi are exploring ways to issue their own stablecoins to address the dollar’s shortcomings.
6. Which Stablecoins Exist in the Market Today?
Around 200 stablecoins are active as June 2025. However, only a handful see widespread use. Below is a categorized list based:
Fiat-Backed Stablecoins (Pegged to fiat currencies, backed by reserves):
- Tether (USDT): $157.6 billion, USD-pegged, on Ethereum, Solana, Tron; widely used, transparency concerns.
- USD Coin (USDC): $61 billion, USD-pegged, Circle-issued; audited, U.S.-regulated.
- Binance USD (BUSD): ~$17 billion, USD-pegged, Binance/Paxos, NYDFS-regulated.
- Pax Dollar (USDP): USD-pegged, Paxos, audited.
- TrueUSD (TUSD): USD-pegged, TrustToken, transparent.
- PayPal USD (PYUSD): USD-pegged, PayPal-issued.
- First Digital USD (FDUSD): USD-pegged, transaction-focused.
- Ripple USD (RLUSD): USD-pegged, Ripple-issued, launched 2024.
- HeLa USD (HLUSD): USD-pegged, HeLa, Australian-backed, DeFi.
- STASIS EURO (EURS): Euro-pegged, STASIS.
- Tether EURt (EURt): Euro-pegged, Tether.
- Tether CNHt (CNHt): Yuan-pegged, Tether, niche.
- Tether MXNt (MXNt): Peso-pegged, Tether, Latin America.
- Global Dollar (USDG): USD-pegged, KuCoin-listed.
- Usual USD (USD0): $1.2 billion, Usual Protocol, Treasury-backed.
- USDtb: Ethena-issued, BlackRock BUIDL-backed, recent launch.
- USD1: World Liberty Financial, USD-pegged, emerging (limited data; X posts note Trump affiliation).
- Anchored USD (AUSD): USD-pegged, DeFi.
- eUSD: Lybra Finance, USD-pegged, DeFi.
- Gemini Dollar (GUSD): Gemini-issued, NYDFS-regulated.
- EURA: Angle Protocol, euro-pegged, DeFi.
- Celo Dollar (cUSD): Celo blockchain, USD-pegged, mobile-first.
- Celo Euro (cEUR): Celo, euro-pegged.
- XSGD: StraitsX, SGD-pegged, Southeast Asia.
- IDRT: Rupiah Token, IDR-pegged, Indonesia.
- GYEN: GMO-Z.com, yen-pegged, niche.
- ZUSD: Z.com, USD-pegged, small.
- BRLA: BRLA Digital, BRL-pegged, Brazil.
- AEUR: Anchored Coins, euro-pegged.
- BGBP: Binance, GBP-pegged, UK.
- USDK: OKLink, USD-pegged, niche.
Crypto-Backed Stablecoins (USD-pegged, backed by cryptocurrency collateral):
- Dai (DAI): $5.36 billion, MakerDAO, Ethereum-backed.
- Liquity USD (LUSD): Liquity, Ethereum-backed.
- sUSD: Synthetix, crypto-collateralized.
- Magic Internet Money (MIM): Abracadabra, multi-chain.
- FRAX: Frax Finance, partially crypto-backed.
- VAI: Venus Protocol, Binance Smart Chain.
- USDX: Kava blockchain, DeFi.
- aUSD: Acala, Polkadot ecosystem.
- crvUSD: Curve Finance, lending-focused.
Commodity-Backed Stablecoins (Pegged to gold or silver):
- Tether Gold (XAUt): Tether, 1 token = 1 ounce gold.
- Pax Gold (PAXG): Paxos, audited gold reserves.
- Digix Gold (DGX): Digix, gold-pegged, niche.
- Perth Mint Gold Token (PMGT): Australian mint-backed.
- AurusGOLD (AWG): Gold-pegged, small.
Algorithmic Stablecoins (Maintained by algorithms, no collateral):
- Ethena USDe: Ethena, USD-pegged, delta-neutral.
- Ampleforth (AMPL): Supply-adjusting, not USD-pegged.
- Frax Share (FXS): Partially algorithmic, FRAX ecosystem.
- TerraUSD Classic (USTC): Niche, post-2022 collapse.
- Reserve (RSV): Reserve Protocol, emerging markets.
- Beanstalk (BEAN): USD-pegged, DeFi.
- USDD: Tron-based, algorithmic, small.
- CUSD (Carbon): Algorithmic, eco-focused.
7. Why Are Stablecoins Gaining Widespread Adoption?
The growing popularity of stablecoins can be linked to how effectively they solve problems found in Bitcoin and fiat currencies. Their steady value makes them ideal for transactions and DeFi, unlike Bitcoin, which is too volatile to function as a regular payment method.
Compared to USD, stablecoins cost much less to use—just a fraction of a cent versus $10 to $40 for bank wires—and they settle in seconds rather than days. In DeFi, they are foundational, helping secure $2.5 trillion in total value locked and offering yields of 5% to 10% through platforms like Compound.
In countries like Turkey and Nigeria, where national currencies have lost a lot of value, stablecoins provide a reliable digital option when U.S. dollars are hard to come by. Major players like PayPal and Visa are integrating stablecoins like PYUSD and USDC into their systems, signaling a major shift toward mainstream use.
8. What Are the Challenges and Future Prospects for Stablecoins?
Despite their benefits, stablecoins still face hurdles. Not all issuers provide the same level of transparency. For instance, USDT has been criticized for incomplete audits, while USDC earns trust through regular attestations.
New regulations, such as the GENIUS Act in the U.S. and fresh rules in the EU, could tighten oversight. This may create obstacles that fiat currencies like the USD don’t have to face. There’s also the risk of losing their dollar peg—USDT once fell to 92 cents—and algorithmic models carry even higher risk, as the TerraUSD incident revealed.
Stablecoins are also used in illegal activities due to their stability, accounting for $24 billion in crypto crime last year, according to Chainalysis. That said, their role in digital finance is only growing stronger. With a $254 billion market cap and $27.6 trillion in transactions last year, they have clearly proven their value. Large banks such as JPMorgan and Citi are now exploring how to create their own stablecoins to offer faster and cheaper alternatives to fiat. Meanwhile, DeFi continues to expand, with stablecoins powering key innovations. As inflation and currency issues persist in emerging markets, stablecoins are becoming even more important.
The Bottom Line
Stablecoins like USDC are now an essential part of the cryptocurrency world. They offer the kind of stability, speed, and access that Bitcoin and traditional fiat currencies often fail to provide. With a market cap of $254 billion and nearly 200 options – from giants like USDT to niche coins like XSGD – stablecoins are deeply involved in payments, DeFi, and financial inclusion.
This article is for informational purposes only and should not be considered financial advice. Investing in stocks, cryptocurrencies, or other assets involves risks, including the potential loss of principal. Always conduct your own research or consult a qualified financial advisor before making investment decisions. The author and publisher are not responsible for any financial losses incurred from actions based on this article. While efforts have been made to ensure accuracy, economic data and market conditions can change rapidly. The author and publisher do not guarantee the completeness or accuracy of the information and are not liable for any errors or omissions. Always verify data with primary sources before making decisions.