In this guide, you’ll learn what stablecoins are, how they work, the main types available, and why they are essential for both trading and everyday crypto use.

Basic Definition of a Stablecoin

A stablecoin is a cryptocurrency designed to keep a stable value, usually pegged to fiat currencies like the U.S. dollar or euro, or to commodities such as gold. This makes them a safe and reliable alternative for both investors and businesses.

The first stablecoin appeared in 2014 and quickly gained traction. Stablecoins offer security during volatile market conditions while taking advantage of blockchain speed and transparency. Initially, they were used mainly for trading on exchanges that lacked fiat pairs, but today they are widely used in DeFi platforms, payment systems, and other financial applications.

As of July 2025, the total stablecoin market capitalization exceeds $261 billion, dominated by Tether (USDT) and USD Coin (USDC).

Main Types of Stablecoin

Stablecoins can be grouped based on the mechanisms they use to maintain price stability. Each model comes with different benefits and risks.

1. Fiat-Backed Stablecoin

These are the most common type of stablecoins. Each token is backed by traditional currency reserves like U.S. dollars or euros. For example, one USDT is always equal to one U.S. dollar.

• Fully backed by fiat reserves held in banks.

• Regular audits confirm the collateralization.

• Can be purchased or redeemed directly for fiat.

• Examples include USDT, USDC, and BUSD.

2. Crypto-Backed Stablecoin

These stablecoins are backed by other cryptocurrencies as collateral. Because crypto assets are volatile, they are usually over-collateralized.

• $1,000 worth of ETH might back $500 worth of stablecoins.

• Smart contracts automatically adjust supply and collateral levels.

• Decentralized protocols manage the reserves instead of companies.

• Examples include DAI and sUSD.

3. Algorithmic Stablecoin

Algorithmic models maintain stability without holding any reserves. Instead, they use automated supply and demand adjustments to keep the price close to the target value.

• When price rises above $1, new tokens are minted.

• When price falls below $1, tokens are burned or supply is reduced.

• These systems do not rely on collateral but are riskier.

• Examples include Ampleforth (AMPL) and the now-defunct TerraUSD (UST).

4. Commodity-Backed Stablecoin

These are backed by physical assets like gold, silver, or oil. They allow investors to gain exposure to commodities via blockchain.

• Each token represents ownership of a specific quantity of a commodity.

• Provide a digital way to invest in physical assets without storage costs.

• Examples include PAX Gold (PAXG) and Tether Gold (XAUT).

5. Hybrid and Seigniorage Models

Hybrid stablecoins combine collateralized and algorithmic mechanisms. Some use seigniorage-style systems that adjust supply algorithmically to maintain stability.

• They may hold partial reserves or none at all.

• Highly experimental and carry greater systemic risk.

What Is USDT (Tether)?

USDT (Tether) is the most widely used fiat-backed stablecoin. Each token equals roughly one U.S. dollar and is backed by Tether Limited’s reserves. USDT acts as a safe haven during crypto market volatility and enables seamless trading between digital assets.

Users can transfer Tether through blockchain networks and store it in ERC-20 compatible wallets safely and easily.

How Stablecoins Work

Stablecoins maintain a stable price using several mechanisms:

• Reserve Mechanisms: Fiat-backed tokens are supported by cash or equivalent assets.

• Smart Contracts: Algorithmic and crypto-backed types use code to control supply and maintain equilibrium.

• Price Adjustment Systems: Token supply increases or decreases to stabilize price movements.

Key Use Cases

• Everyday Payments: Used for purchasing goods and services without price volatility.

• DeFi Applications: Serve as collateral in lending, staking, and liquidity pools.

• Cross-Border Transactions: Enable cheaper and faster global money transfers.

• Investment and Savings: Provide a stable store of value during market downturns.

Advantages of Stablecoins

• Low Volatility: Protect investors from market swings.

• Fast and Low-Cost Transactions: Ideal for peer-to-peer and cross-border payments.

• DeFi Integration: Used across lending, yield farming, and liquidity protocols.

• Access to Commodities and Fiat: Simple exposure to gold or USD without intermediaries.

• High Liquidity: Most trading pairs use stablecoins like BTC/USDT or ETH/USDC.

Disadvantages and Risks

• Counterparty Risk: Issuers may lack full reserves or fail to honor redemption.

• Centralization: Fiat-backed stablecoins depend on trust in a single company.

• Algorithmic Instability: May lose their peg in extreme market conditions.

• Regulatory Risk: Subject to freezes, sanctions, or government intervention.

• De-Pegging: Occurs when the stablecoin’s value deviates from its target asset.

Most Popular Stablecoins

The leading stablecoins in 2025 include:

• Tether (USDT) – the largest by trading volume.

• USD Coin (USDC) – known for transparency and regulatory compliance.

• Dai (DAI) – decentralized and backed by Ethereum collateral.

• PAX Gold (PAXG) – pegged to physical gold.

2025 Outlook and Future Trends

As of 2025, the global stablecoin market surpasses $261 billion, showing continued growth and institutional adoption.

• CBDCs (Central Bank Digital Currencies): Expected to coexist and integrate with stablecoins for efficient cross-border settlements.

• Corporate Adoption: Companies are increasingly using stablecoins for payments and reserves.

• Regulatory Focus: Authorities are developing frameworks for transparency, auditing, and investor protection.

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Building the AI–Blockchain Connection

Led by Ethereum core developer Davide Crapis, the dAI team aims to foster AI-driven solutions within the Ethereum ecosystem while also attracting established AI companies from outside the blockchain space.

“Our goal is to create a bridge between blockchain organizations and AI companies,” Crapis explained, highlighting the team’s broader mission to bring two of the fastest-growing technologies closer together.

First Milestone: ERC-8004 Proposal

In the short term, dAI will concentrate on advancing ERC-8004, a proposed standard designed to allow AI agents to seamlessly discover, verify, and interact with one another on Ethereum. Although still in its early stages, the standard is expected to be presented at the upcoming Devconnect conference in Buenos Aires this November.

A Vision for Decentralized AI

According to Crapis, Ethereum’s investment in AI is critical for ensuring that the technology evolves sustainably. The vision is to prevent AI infrastructure from being dominated by a handful of major corporations, instead leveraging Ethereum to provide a decentralized foundation.

“Until now, Ethereum’s infrastructure has been largely finance-focused. Moving forward, it should also serve as a strong base for artificial intelligence,” Crapis emphasized.

Strategic Partnerships on the Horizon

The Ethereum Foundation also revealed that the dAI team has already begun forming research collaborations with leading Silicon Valley companies. While the details remain under wraps, more information is expected to be released in the coming months.

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USDT on Aave Surpasses $8.1 Billion!

This development is seen as a strong indicator of growing liquidity and institutional interest in the DeFi ecosystem. In particular, the fact that large investors are allocating more funds to decentralized platforms increases the reliability and usage rate of protocols like Aave. The high amount of USDT also signals that lending and borrowing activities on the platform may reach record levels.

What Is Aave?

Aave is a decentralized lending system that allows users to lend, borrow, and earn interest on crypto assets without intermediaries. Operating on the Ethereum blockchain, Aave uses smart contracts to ensure the secure management of assets. This means users do not need to trust a specific institution; they only need to trust that the code will execute as intended.

The platform’s software enables the creation of lending pools for 17 different cryptocurrencies, including ETH, BAT, and MANA. As with other DeFi lending protocols, borrowers must first post collateral and can only borrow up to the value of the collateral they deposit.

Borrowers receive a special token called an “aToken,” pegged to the value of another asset. These tokens allow investors to earn interest on their deposited assets. For example, a user may post DAI as collateral and borrow ETH, gaining exposure to different cryptocurrencies without owning them directly.

Aave also leverages blockchain’s unique capabilities to introduce features like flash loans and other innovative credit mechanisms.

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At 9:00 a.m. ET, Plasma launched its raise through the ICO platform Sonar, allowing users to deposit stablecoins in exchange for the right to purchase its native token, XPL. By 9:48 a.m., the raise was complete, far surpassing the initial goal of $50 million, which represented 10% of XPL’s total supply. More than 1,100 wallets participated, each averaging around $35,000 in deposits.

First ICO on Sonar Ends in Massive Success

This fundraising event marks the first official project launch on Sonar, a new ICO platform built by Echo, the angel investment initiative created by crypto investor Cobie. Plasma’s launch through Sonar has set a high bar, showing that interest in stablecoin-based ecosystems is at an all-time high.

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According to data from Arkham, the Plasma vault now holds $345 million in USDC, $146.1 million in USDT, $7.5 million in USDS, and $1.21 million in DAI.

Tether Transaction Fees? Plasma Aims for Zero

Plasma is building an EVM-compatible sidechain designed to eliminate transaction fees for Tether’s USDT. This vision has already caught investor attention: in October 2024, Bitfinex led a $3.5 million funding round, followed by a $20 million Series A raise in February 2025.

The broader surge in stablecoin interest among institutions and venture funds played a clear role in the rapid raise. With USDT currently making up 64% of all stablecoin supply, projects like Plasma are positioning themselves at the heart of future infrastructure.

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Until March 31, Tokens Can Be Converted

Crypto.com will stop trading USDT and nine other tokens as of January 31. However, users will have until March 31, 2025 to withdraw or convert these tokens into MiCA-compliant assets. Any tokens not converted after this date will be automatically converted by the exchange into MiCA-compliant stablecoins or assets equivalent in value.

Crypto.com’s representative stated that this process is an important step to protect users and ensure full compliance with the regulatory framework.

Which Tokens Will Be Delisted?

Among the tokens that Crypto.com will delist are the following:

• Tether (USDT)
• Wrapped Bitcoin (WBTC)
• Dai (DAI)
• Pax Dollar (PAX)
• Pax Gold (PAXG)
• PayPal USD (PYUSD)
• Crypto.com Staked ETH (CDCETH)
• Crypto.com Staked SOL (CDCSOL)
• Liquid CRO (LCRO)
• XSGD (XSGD)

These tokens are being delisted in line with the European Securities and Markets Authority’s (ESMA) announcement to limit non-MiCA-compliant stablecoins as of January 31, 2025.

Expanding Delist Trend for Tether (USDT)

Crypto.com’s delisting of USDT is one of the latest developments in the process of European exchanges and service providers adapting to MiCA regulations. Coinbase had delisted USDT in October 2024 on the grounds that it was not MiCA-compliant . Coinbase had given its customers the option to convert their USDT into MiCA-compliant stablecoins, specifically Circle’s USDC.

With MiCA in full effect, many crypto asset service providers in Europe have obtained or are working to obtain MiCA licenses. Crypto.com is also in the process of obtaining a license in Malta.

The Competition Between USDT and Its Rivals

USDT is the largest stablecoin in the market with a market capitalization of $139 billion. However, its rival USDC, which benefits from MiCA compliance, is currently in second place with a market capitalization of $52 billion. Circle’s USDC was approved as MiCA-compliant in July 2024, enabling the USDC to gain acceptance in the European market.

Impact of MiCA Regulations on the Industry

MiCA regulations aim to make the operations of crypto asset service providers more transparent and compliant. However, the fact that the market’s largest stablecoins, especially USDT, are not covered by MiCA may affect investors’ preferences. After March 31, USDT is expected to be completely abolished in Europe, and the impact of this on the market is a matter of curiosity.

Crypto.com’s move is seen as an important milestone on the road to compliance with MiCA regulations. However, these changes could reshape the dynamics of the cryptocurrency market.

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The newly branded USDS, formerly known as DAI, is touted as the first major DeFi-native stablecoin on Solana. It introduces innovative lending, borrowing, and trading capabilities across Solana’s top DeFi platforms.

Sky’s Vision for Solana

Sky’s Nov. 19 announcement described the USDS launch as the initial phase of its broader strategy to bolster Solana’s DeFi liquidity and TVL. The team is also considering deploying SkyLink, a cross-chain bridge for USDS and its savings-focused counterpart, sUSDS, subject to governance approval.

To accelerate adoption, Sky is offering a massive $500,000 USDS reward pool for early users and liquidity providers:

• Kamino Finance: Weekly rewards of 200,000 USDS for USDC/USDS liquidity providers and 100,000 USDS for stablecoin suppliers.
• Drift Protocol: 100,000 USDS rewards for stablecoin suppliers.
• Save Finance: Monthly rewards totaling 400,000 USDS for users supplying USDS.

The protocol utilizes Wormhole’s Native Token Transfer (NTT) for seamless operations, enhancing cross-chain functionality.

The shift from Maker to Sky has not been without challenges. The rebranding caused some confusion, even prompting co-founder Rune Christensen to propose reverting to the original name. However, the idea was ultimately rejected. Additionally, the governance token transition from MKR to SKY has been slow, as SKY is yet to list on exchanges, impacting its adoption.

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With a market capitalization of $5.3 billion, USDS ranks as the third-largest stablecoin, behind Tether (USDT) and USD Coin (USDC), which dominate 88% of the market. Despite its promising potential, USDS faces stiff competition in an already crowded stablecoin arena.

While Solana’s explosive DeFi growth has been noteworthy, much of its popularity has been fueled by the speculative frenzy surrounding meme coins, thanks to platforms like Pump.fun that make token creation fast and inexpensive.

Sky’s bold move onto Solana demonstrates a commitment to advancing DeFi innovation. The success of USDS will hinge on its ability to differentiate itself in a competitive market while leveraging Solana’s scalability and speed.

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MakerDAO pointed out that the redenomination seeks to enable more users to possess large quantities of the new governance token, NGT, therefore democratizing the decision-making process and enabling greater involvement in the governance of the platform.

MakerDAO will be launching a new stablecoin, NewStable (NST), pegged 1:1 with Dai alongside the NGT introduction. The current Dai and MKR tokens will stay operational, so users will be able to pick between the original tokens and their replacement.

MakerDAO said, “Both tokens are expected to stay unchanged for the foreseeable future unless governance decides otherwise.”

Emphasizing user choice, the plan notes that upgrading to NewStable and NewGovToken is optional. Users switching to the new tokens can go back to the original Dai and MKR, therefore maintaining the adaptability of the MakerDAO ecosystem.

MakerDAO also mentioned that eventually their ecosystem would “eventually explore ways to differentiate between Dai and NewStable.” The DAO claims Dai might keep its emphasis on crypto-native use cases in this configuration, and NewStable could aim for mass adoption.

Released by a distributed entity, Dai is the biggest U.S. dollar-pegged stablecoin available. With a market valuation of $5.2 billion, it also ranks as the as the third-largest stablecoin overall after Tether USD and Circle’s USDC.

With an expected quantity of one million tokens and a market capitalization of more than $2 billion, the Maker token rules the project.

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This is just one example of the Foundation’s previous similar sales. A total of 2,262 ETH sales in 2023 were made at an average price of $1,609 per ETH. The Ethereum Foundation still holds a large amount of ETH: $806 million in ETH, $79.81 million in WETH.

However, despite these sales, the Ethereum Foundation still holds a significant amount of coin. According to on-chain data, the Foundation holds a total of $886 million in ETH assets, with $806 million in ETH and $79.81 million in WETH.

The Foundation also holds $500,000 in stablecoins and $15,000 in BNB. However, it is alleged that the BNB assets were transferred without permission.

These changes in the Ethereum Foundation’s portfolio are being closely watched by the crypto community.

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In an announcement on Monday, Uniswap stated that the tokens influenced by the commission fee include ETH, USDC, WETH, USDT, DAI, WBTC, agEUR, GUSD, LUSD, EUROC and XSGD.

Related: What Is Uniswap?

Uniswap founder Hayden Adams said in an announcement on X;

I’m working in the crypto field because of the massive positive impact it can create on the world, eliminating gatekeepers and increasing access to value and ownership. I am proud of the contributions Uniswap Laboratories makes to this effort and I want to ensure that we are building sustainable systems to support this work. From day one, we have worked to be both transparent and sustainable. As a next step, starting from tomorrow, we will charge a 0.15% swap fee (a first in Labs history) for certain tokens in our web application and wallet. The token list and we will update fee level in our Help Center linked below. This is separate from the Uniswap Protocol fee change voted on by UNI token management.

I work in crypto because of the immense positive impact I believe it can have on the world, removing gatekeepers and increasing access to value and ownership.

I’m proud of the ways @Uniswap Labs has contributed to that effort and want to make sure we’re creating sustainable…

— hayden.eth (@haydenzadams) October 16, 2023

Interface Fee (Uniswap)

Adams also stated that he created the protocol to be a permissionless and decentralized public good. Also, users have numerous options to use it by interacting directly or through aggregators, other user interfaces, or smart contracts. Our interface continues to be the best. Also, we are going on to spend a large amount of love (and money) to make this happen.

This interface fee is one of the lowest in the industry and will allow us to continue developing, building, improving, and expanding crypto and DeFi. Just this year (so far!) we have launched an iOS wallet, Android wallet, UniswapX. Also we have launced Permit2, Uniswap v4 draft codebase, and more in our web application.

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On-chain data shows that 1700 ETH came from a multisig wallet address known as 0xbC9a9 about 30 minutes before the transaction. This transaction shows that the Ethereum Foundation has strengthened its position in the stablecoin market.

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Ethereum Foundation, although there has not been an official statement about why it made this move, analysts have started to speculate about this. Some believe this movement may be part of a strategy to mitigate the effects of recent fluctuations in the marketplace.

This transaction could also have effects on the wider cryptocurrency market. Investors are closely following Ethereum Foundation’s actions to get clues about the future of the ecosystem. This USDC purchase may possibly hint at future collaborations involving stablecoins.

While these large-scale transactions cause a wide echo in the crypto community. Therefore, we should closely monitor such strategic moves along with uncertainties about the future of crypto assets.

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