A stablecoin is form of cryptocurrency whose value is fixed by pegging them to the price of another asset. Stablecoins can be pegged to various kinds of assets, for example USD Coin (USDC), Paxos (PAX), and TrueUSD (TUSD), are tokens backed on a 1:1 ratio by money held in the bank accounts. To issue these cryptocurrencies the companies need to place equivalent amount of FIAT currency such as USD in bank accounts. By pegging to real-word assets in this case US dollar, these coins avoid price volatility known in the cryptocurrency trading markets. Some stablecoins are pegged to other cryptocurrencies, referred to as crypto-collateralized stablecoins. The peg of these coins is maintained through over-collateralization and stability mechanisms. A prominent example is DAI, the stablecoin minted in the Maker DAO ecosystem.
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