The Complete Guide to Stablecoins You Must Know in 2025: From Beginner to Expert

As Bitcoin reaches the $100,000 mark, the crypto market is ushering in a new wave of enthusiasm. However, during this rally, the importance of stablecoins is often overlooked—they are the true bridge connecting traditional finance and the on-chain world. Data shows that the total market cap of global stablecoins has surpassed $210 billion and continues to grow.

The core question: What exactly are stablecoins? Why should you pay attention to them?

The Essence of Stablecoins: The Fusion of Cryptography and Finance

Stablecoins are not mysterious; simply put, they are cryptocurrencies whose prices are anchored to stable assets. Whether it’s USD, EUR, or gold, the goal of stablecoins is only one—maintain a relatively fixed price.

This addresses a key pain point in the crypto market: volatility. Bitcoin can surge or plunge by $5,000 in a day, which is too disruptive for daily transactions. Stablecoins allow you to trade confidently on-chain while enjoying the convenience of blockchain.

How do stablecoins maintain this “stability”? There are mainly two approaches:

First: Backed by real assets
Issuers hold actual reserves of USD, government bonds, or other assets, ensuring you can redeem 1:1 at any time. Risks? Dependence on the transparency and credibility of the issuer.

Second: Algorithmic regulation
Using code and smart contracts to automatically increase or decrease supply to maintain price stability. Sounds high-tech, but the collapse of UST in 2022 vividly proved—algorithmic stablecoins are prone to failure.

Five Practical Uses of Stablecoins You Might Have Used

1. “Safe haven” in trading

When trading on an exchange, don’t want to convert directly to fiat or want to cut losses? Switch to stablecoins. Save on withdrawal fees and avoid congestion during market dips.

2. Cross-border transfers, instant settlement

Traditional remittances take days and are costly. Using stablecoins? Done in minutes, with negligible fees. A real boon for expatriates.

3. “Universal solvent” in DeFi

Lending, liquidity mining, yield farming—stablecoins are the most used collateral and trading pairs in DeFi ecosystems. Their stability makes complex operations manageable.

4. Manage assets without bank cards

In regions with poor financial infrastructure, managing assets with just a phone and internet is true financial inclusion.

5. “Insurance” during market crashes

Uncertain about the market? Convert crypto assets into stablecoins for safety and re-enter when opportunities arise. It’s also psychologically comforting.

Four Stablecoin Models: Which Is More Reliable?

Fiat-backed: The most traditional and safest

Each USDT, USDC is backed by actual cash or cash equivalents. Risks? Relying on the issuer’s transparency and regulatory environment. Examples include USDT, USDC, TUSD.

Commodity-backed: The appeal of tangible assets

Backed by real commodities like gold or oil. Benefits include physical backing; drawbacks are the difficulty in converting to physical assets and exposure to commodity price fluctuations. Example: PAX Gold (PAXG).

Crypto-collateralized: Decentralized but complex

Collateralized with ETH, BTC, etc. The problem is these assets are volatile, requiring over-collateralization—locking $1,500 worth of assets to issue $1,000 stablecoins. This wastes capital efficiency. DAI is an example.

Algorithmic: Innovative but risky

Rely entirely on code, automatically adjusting supply based on market demand. Sounds advanced, but the 2022 UST crash taught everyone how risky algorithmic stablecoins can be.

Stablecoins to Watch in 2025

Tether (USDT) — The King of Stablecoins

Largest market share, over $1.4 trillion in market cap. Why so popular? Because of its unmatched liquidity—USDT is available on any major exchange and chain.

Tether earned $7.7 billion in Q3, demonstrating strong financial performance. USDT is distributed across 109 million wallets worldwide, with a huge user base. In short: liquidity is king.

USD Coin (USDC) — The Compliance Player

Jointly issued by Circle and Coinbase, with a current circulation market cap of $76.58 billion. Core advantage? Compliance and transparency. Reserves are regularly audited, favored by institutional investors.

Ripple USD (RLUSD) — The Newcomer

Ripple’s new stablecoin launched in December 2024, reached a market cap of $53 million within two weeks. It operates on both the XRP Ledger and Ethereum, ideal for those seeking efficient cross-chain remittances.

Ethena’s USDe — Earn While Stable

Interesting concept—USDe allows stablecoins to generate yield. It uses ETH staking rewards to hedge short positions, providing holders with annualized returns. In just 10 months, it accumulated a market cap of $6 billion, showing market demand for yield-bearing stablecoins.

Recently, Ethena also launched USDtb, backed by BlackRock’s RWA tokens, aiming to tap into the traditional asset tokenization market.

DAI (DAI) — DeFi Backbone

Issued by MakerDAO, truly decentralized stablecoin. Deposit ETH, stablecoins, or other assets into smart contracts to borrow DAI. With a market cap of $4.24 billion, it’s a key infrastructure in DeFi.

DAI has no centralized issuer; it’s governed entirely by the community, making it the only choice for those seeking decentralization.

First Digital USD (FDUSD) — The Fastest Growing

Launched in June 2023, it became a mainstream stablecoin with a market cap of $14.5 billion within a year and a half. FDUSD emphasizes transparent reserves and multi-chain deployment, now available on Ethereum, BNB Chain, Sui, and more.

PayPal USD (PYUSD) — Traditional Payment Entry

PayPal launched PYUSD in 2023. Although late to the game, it benefits from PayPal’s large user base. Currently valued at $3.73 billion, it was integrated into Solana in May and enabled US merchants to trade crypto in September.

Usual USD (USD0) — RWA Wave Representative

Backed 100% by US short-term Treasury bonds, with a latest market cap of $1.2 billion. USD0 represents a new direction for stablecoins—directly generating yields from real assets, bringing income to on-chain stablecoins.

Frax (FRAX) — Algorithm Evolution

From hybrid to fully collateralized, with a market cap of $63.27 million. It demonstrates the evolution of algorithmic stablecoins—retaining innovation while enhancing risk control.

Ondo US Dollar Yield (USDY) — Institutional-Grade Solution

Product from Ondo Finance, backed by government bonds and bank deposits, with increasing value over time. Attractive to institutional investors seeking stable cash flow, with a market cap of $448 million.

Three Major Pitfalls of Stablecoins—Avoid These Traps

Regulatory Gray Area
Different countries’ attitudes toward stablecoins are still evolving. Heavy regulation could arrive suddenly, causing liquidity issues or even suspension of certain stablecoins.

Technical Risks
Smart contract bugs, chain attacks, code flaws—these can lead to direct financial losses. The collapse of UST was due to an algorithmic vulnerability.

Market Risks
Stablecoins are not risk-free. Rapid supply increases, market panic, large redemptions, or de-pegging events can happen at any time.

Final Advice

Stablecoins have become an indispensable part of the crypto ecosystem. Which to choose depends on your needs:

• Want maximum liquidity? Choose USDT
• Value compliance and transparency? Choose USDC
• Want full decentralization? Choose DAI
• Looking to earn yields on stablecoins? Try USDe or USDY

The key is understanding each stablecoin’s risk profile and avoiding blind following. In this market full of opportunities and hidden risks, knowledge and caution are your best shields.

Quick FAQs

Q: What was the first stablecoin?
A: Tether (USDT), launched in 2014, now a market benchmark.

Q: Can stablecoins collapse?
A: Yes. If reserves are insufficient, mismanaged, or if the algorithm is flawed, they can de-peg or become worthless. UST is a cautionary tale.

Q: Are stablecoins regulated?
A: Increasingly so. Some countries, like Singapore’s MAS, have established regulatory frameworks.

Q: Can I store stablecoins in hardware wallets?
A: Yes. Any hardware wallet supporting ERC-20 or other chain standards can store stablecoins.

Q: How to earn yields with stablecoins?
A: Through DeFi lending platforms, certain exchange savings products, or liquidity mining, typically offering annual yields of 3%-10%.