Decentralized Stablecoins The Future of Stable Value in DeFi
Decentralized Stablecoins: The Future of Stable Value in DeFi | Atharv Gyan 1. Introduction to Stablecoins Stablecoins are a class of cryptocurrency designed to maintain a stable value by pegs to external assets most commonly fiat currencies like the U.S. dollar, but also commodities or other cryptocurrencies. They emerged to solve the extreme volatility that plagues Bitcoin and many altcoins, enabling crypto‑native applications (especially in DeFi) to transact, lend, borrow, and hedge with minimal price risk. Traditional stablecoins fall into four categories: Fiat‑Collateralized (e.g., USDC, Tether USDT) Commodity‑Backed (e.g., PAXG backed by gold) Crypto‑Collateralized (e.g., MakerDAO’s DAI on Ethereum) Algorithmic (e.g., Terra USD, Ampleforth’s AMPL) Decentralized stablecoins are those that avoid reliance on a central issuer meaning no single ...