Stablecoin basics

A stablecoin is a digital token built on a public blockchain that seeks to maintain a consistent price relative to a reference asset (commonly $1 USD, but also sometimes euros, gold, or other assets).

Because they operate on public networks, stablecoins can be: 

• Sent globally in minutes

• Integrated into smart contracts and web3 apps

• Used for peer-to-peer payments, settlements, and more

How stablecoins work

While designs vary, most stablecoins follow one (or a mix) of these approaches to help maintain their peg:

Fiat‑collateralized: A centralized issuer holds reserves (such as cash or short‑term US treasuries) that correspond to the number of tokens in circulation. Users can typically redeem 1 token for approximately $1 from the issuer, while market participants keep secondary-market prices close to the peg.

Crypto‑collateralized: A protocol locks crypto assets as collateral in smart contracts and issues a dollar‑pegged token against them. These systems are usually over-collateralized to account for volatility. If collateral values drop, automated mechanisms liquidate positions to protect the peg.

Algorithmic (a.k.a. non‑collateralized or seigniorage‑style): Software adjusts token supply in response to price, with incentives for arbitrage when the price drifts from the target. These designs are experimental and can carry higher risk.

Commodity‑backed / hybrid: Some tokens are backed by assets such as gold or combine multiple elements of the models described above.

Why stablecoins matter

Faster, global payments: Send funds worldwide in minutes, 24/7.

Predictable pricing in web3: Price items, services, and fees in a relatively steady unit of account.

Access to digital dollars: For users in places with limited banking access, stablecoins can offer a familiar currency in a digital form.

Programmability: Smart contracts enable programmable money, from subscriptions to escrow and beyond.

Where you’ll see stablecoins in web3

Wallets & payments: Many wallets enable you to hold and send stablecoins, as well as pay network fees, on supported chains.

NFTs and digital items: Some buyers and creators prefer listing or settling in a stable unit to reduce exposure to market volatility. Availability varies by chain and marketplace.

DeFi building blocks: Stablecoins are frequently used as collateral or as a base asset in onchain apps.

Note: Token compatibility and features vary by region, wallet, and chain. Always confirm that a specific token is supported by the app you plan to use.

Risks and considerations

“Stable” doesn’t mean risk‑free. Key things to know:

• De‑peg risk: Market stress, insufficient reserves, or smart contract issues can cause a coin to trade away from $1.

• Reserve transparency & custody: For fiat‑backed coins, look for regular, reputable attestations and clarity on where and how reserves are held.

• Smart‑contract risk: Bugs or oracle failures can impact crypto‑collateralized coins.

• Issuer controls: Some centrally issued coins can freeze or block specific addresses per their policies.

• Regulatory change: Rules for issuing and using stablecoins differ by country and may evolve.

• Chain & bridge risk: Using stablecoins across multiple networks often involves bridges, which introduce additional security risks.

How to get and use a stablecoin

Set up a compatible wallet: Choose a wallet that supports the chain and token you plan to use.

Acquire the stablecoin: Options include purchasing through a regulated on‑ramp, swapping from another token within a wallet, or redeeming from an issuer where available.

Verify the contract address: Only interact with the official token contract on the correct chain. Beware of look‑alike tokens.

Mind network fees and limits: Fees vary by chain and app. Try a small test transfer first.

Use it in apps: Send to friends, pay merchants that accept it, settle purchases, or interact with supported web3 apps.

Security tip: Never share your wallet’s seed phrase. Double‑check URLs, contracts, and permissions before you sign any transaction.

Disclaimer: This content is for informational purposes only and should not be construed as financial or trading advice. References to specific projects, products, services, or tokens do not constitute an endorsement, sponsorship, or recommendation by OpenSea. OpenSea does not guarantee the accuracy or completeness of the information presented, and readers should independently verify any claims made herein before acting on them. Readers are solely responsible for conducting their own due diligence before making any decisions.