What is a stablecoin?
A stablecoin is a cryptocurrency that maintains a stable price — usually $1.00 — by being backed by real-world assets, other cryptocurrencies, or algorithmic mechanisms. The most widely used stablecoins are USDT (Tether) and USDC (USD Coin).
Why stablecoins matter for DeFi
Without stablecoins, DeFi yield would be undermined by price volatility. If you deposit $1,000 worth of ETH and earn 20% yield, but ETH drops 30%, you've lost money. Stablecoins solve this: deposit $1,000 USDT, earn yield, withdraw $1,000 + yield — no price risk on the principal.
Types of stablecoins
| Type | Example | How it stays stable |
|---|---|---|
| Fiat-backed | USDT, USDC | 1:1 reserves held by issuer |
| Crypto-backed | DAI | Overcollateralised with ETH |
| Algorithmic | (historical) | Supply/demand mechanisms |
Fiat-backed stablecoins (USDT, USDC) are the most widely used in DeFi and carry the lowest depegging risk.
Stablecoins on BNB Smart Chain
Both USDT and USDC are available on BNB Smart Chain as BEP-20 tokens. They can be used in DeFi protocols like TurboLoop with transaction fees of less than $0.01.