What is a stablecoin? A basic guide to DeFi for beginners on USDT and USDC.

What is a stablecoin?

A stablecoin is a type of cryptocurrency designed for pricing by pegging its value to reference assets, most commonly the US dollar. The two most widely used ones in this category are USDT ( Tether ) and USDC (USD Coin), both of which have been extensively deployed on both DeFi apps and exchanges as a way of holding or transferring value without relying directly on bank accounts.

For Thai users who are familiar with pricing in baht ( THB ) on a market like Bitkub , understanding stablecoins is therefore basic, as they often act as "bridges" between local currencies and other cryptocurrencies.

Why is stablecoin important?

The main reason for this is volatility, Bitcoin or Ethereum can go up and down in price over the course of a day, but trading money or transferring value across borders like Myanmar requires an asset with relatively stable prices.

In the DeFi system, stablecoins are used for three main purposes: to provide liquidity on a zero-distributed exchange market; as collateral for loans; and as a means of transferring between assets that circulate without being converted back into money by banks.

How does it keep the price stable, and how many types are there?

Mechanisms can be divided into three types: the mechanism of action, which is to

The type with fiat collateral. Like USDT and USDC, which are backed by cash and assets equivalent to the cash held by the issuing company, with the issuer promising to redeem the token for the underlying currency.

It's got some kind of crypto collateral. Using other cryptocurrencies, smart contracts often require over-collateralized collateral to cover price fluctuations.

It's like an algorithm. Try to maintain price stability by adjusting supply through coding instead of holding a full inventory. History shows that these designs are much more risky, some have fallen off the peg and collapsed.

How does it affect Thai and Yemeni users?

For the average user, a stablecoin is an in-port tool that helps to take a break from volatility. But "stable" does not mean "risk free". Stability depends on the reliability and transparency of the issuer's reserves (in fiat -backed cases) or the robustness of its protocol design (in algorithmic cases).

In terms of regulation, regulatory agencies in many countries including Thailand are developing specific rules for issuing and using stablecoins. Users should follow the Thai the SEC (Thailand) announcement and only use assets that have widespread and transparent disclosure.

This article explains the mechanism of operation of a stablecoin. It does not predict the future value or security of any one token.