How Do Stablecoins Work? A Beginner's Guide To Crypto Pegs And Stability

Key Points

1. Stablecoins maintain stability through various models, including being backed by fiat reserves (e.g., Tether's USDT pegged 1:1 to the U.S. dollar) or commodities like gold.

2. They enable fast, low-cost blockchain transactions and provide stability in volatile crypto markets, making them useful for trading and DeFi applications.

3. Stablecoins face risks, including losing their peg during market stress, requiring users to understand their underlying mechanisms.

4. Transaction volumes for stablecoins reached $1.82 trillion in March 2025, highlighting their growing role in digital finance.

5. Beginners can acquire stablecoins through exchanges or debit cards and should store them securely in trusted wallets.