A stablecoin refers to a type of cryptocurrency that has a stable value. Unlike other types of cryptocurrencies — which can be volatile — the price of stablecoins usually doesn't change over time. That's because their value is tied to another asset, like the U.S. dollar.
Learn about how stablecoins work, types of stablecoins, the potential benefits and risks of using them, and how they may fit into the world of digital currencies.
Stablecoins are normally pegged to an external asset, like a traditional currency or commodity, so their prices remain relatively stable. This may be different from other types of cryptocurrencies like Bitcoin and Ethereum. Their value typically isn't tied to any traditional currency, so their prices may change drastically based on supply and demand.
How do stablecoins maintain stability? This is usually done with one of two common methods:
Stablecoins are tools aiming to bridge the gap between traditional financial systems and the world of cryptocurrencies. Generally, the purpose of stablecoins is to provide a more reliable, less volatile cryptocurrency option. They may offer the speed and affordability of popular cryptocurrencies like Bitcoin with the stability of traditional currencies like the U.S. dollar.
There are different types of stablecoins to choose from. Stablecoins are often categorized by the kind of collateral that backs them. Three main types of stablecoin collateral include:
Collateral can be considered “on-chain”, like crypto collateral, or “off-chain”, like fiat or commodity collateral. Off-chain collateral means the assets are kept in reserve outside of the blockchain by a bank or financial institution.
Stablecoins have a variety of different use cases. Here are some examples:
It's important to understand the potential advantages and risks of stablecoins. For example, possible benefits of stablecoins include:
Potential risks of stablecoins include:
PayPal has its own branded stablecoin, PayPal USD1 (or PYUSD), backed by secure and highly liquid assets. People can use the PayPal app or website to buy, sell, hold, and transfer PYUSD2, along with other cryptocurrencies.
PYUSD is designed to maintain a $1 USD value. People can use PYUSD to check out with crypto at eligible online stores, send crypto to friends in the U.S., and buy other cryptocurrencies. They can also transfer PYUSD to compatible external wallets in just a few steps.
Learn about getting started with PayPal Stablecoin.
Save cash back offers from top brands. Plus send money, track packages, and more.
We use cookies to improve your experience on our site. May we use marketing cookies to show you personalized ads? Manage all cookies