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Stable Coin Factors
Stablecoins are designed to hold a fixed value over time. They are not all the same — and the difference starts with what the coin is pegged to, and what chain it is built on.
· Steven Rupp
Original wordingAll stablecoins are designed to maintain a fixed value over time. They are not all the same.
What is it pegged to?
Most commonly, a paper fiat currency. Some are being built to peg to a commodity — gold or silver. Some are now pegged to bitcoin.
What is it built on?
The coin itself is issued on a specific blockchain. Chains differ in governance, consensus (mining), and more. Examples: Ethereum, Solana, Ripple, or Stacks.
That second question matters.
These are only some of the factors. In the past, some stablecoins have de-pegged and crashed. Luna is the example. Research the one in front of you.
Questions worth asking
- What is it pegged to?
- How confident are you in what it is pegged to?
- What blockchain?
- How secure is that chain?
- What is the governance structure of that chain?
- Who has custody of what?
- How is supply issued?
- What visibility and control do certain parties or entities have?
- Can it move freely app to app, chain to chain?
- KYC?