Stablecoin FAQ

This document collects common questions about stablecoins to help you quickly find answers.

Basic Questions

Q1: What is a stablecoin?

A: A stablecoin is a type of cryptocurrency designed to maintain a stable value. It is typically pegged to a fiat currency (such as the US dollar) or other assets (such as gold) to maintain a relatively stable price. Unlike volatile cryptocurrencies like Bitcoin and Ethereum, stablecoin prices usually stay around $1.

Q2: Are stablecoins really stable?

A: Stablecoins are not absolutely stable, and prices may fluctuate between $0.99-$1.01. In extreme cases (such as market panic, reserve issues), prices may deviate from $1. However, compared to other cryptocurrencies, stablecoins have much lower volatility.

Q3: What types of stablecoins are there?

A: Stablecoins are mainly divided into four types:

1. Fiat-Collateralized: Backed by fiat currency reserves (e.g., USDT, USDC)
2. Crypto-Collateralized: Over-collateralized by other cryptocurrencies (e.g., DAI, USDE)
3. Algorithmic: Maintain stability through algorithmic supply adjustment (e.g., FRAX, LUSD)
4. Commodity-Collateralized: Backed by physical assets like gold (e.g., PAXG)

Q4: What's the difference between stablecoins and fiat currency?

A: Main differences include:

• Issuer: Stablecoins issued by private companies or protocols, fiat by governments
• Technical Basis: Stablecoins based on blockchain, fiat on traditional financial systems
• Regulation: Stablecoin regulation still developing, fiat strictly regulated
• Use Cases: Stablecoins mainly for crypto trading and DeFi, fiat for daily payments

Usage Questions

Q5: How to buy stablecoins?

A: Common ways to buy stablecoins:

1. Centralized Exchanges: Buy with fiat on Binance, Coinbase, etc.
2. Decentralized Exchanges: Exchange other cryptocurrencies on Uniswap, Curve, etc.
3. Wallet Apps: Some wallets support direct purchase
4. P2P Trading: Trade directly with other users

Detailed guide: Buying Stablecoins

Q6: How to sell stablecoins?

A: Ways to sell stablecoins:

1. Exchange: Sell stablecoins for fiat on exchanges
2. DEX Exchange: Exchange for other cryptocurrencies on DEX
3. P2P Trading: Trade directly with other users
4. Payment Use: Some merchants accept stablecoin payments

Detailed guide: Selling Stablecoins

Q7: Can stablecoins be used for daily payments?

A: Yes, but acceptance is limited:

• Online Payments: Some e-commerce and online services accept stablecoins
• Physical Stores: Lower acceptance, but growing
• Cross-Border Payments: Stablecoins are very suitable for cross-border transfers
• DeFi Payments: Widely used in DeFi ecosystem

Q8: Do I need to pay taxes on stablecoins?

A: This depends on your country/region:

• United States: Stablecoin trading may generate capital gains tax
• European Union: Some countries treat stablecoins as assets, requiring taxes
• China: Currently prohibits cryptocurrency trading
• Recommendation: Consult local tax professionals for specific regulations

Technical Questions

Q9: How do stablecoins maintain price stability?

A: Different stablecoins use different mechanisms:

• Fiat-Collateralized: Maintain stability by holding equivalent fiat reserves
• Crypto-Collateralized: Maintain stability through over-collateralization and liquidation mechanisms
• Algorithmic: Maintain stability through algorithmic automatic supply adjustment
• Hybrid: Combine multiple mechanisms

Detailed explanation: Technical Principles

Q10: What is depegging?

A: Depegging refers to stablecoin price deviating from its target price (usually $1). For example, USDT price dropping to $0.95 is depegging. Depegging may be caused by:

• Reserve asset issues
• Large-scale redemptions
• Market panic
• Regulatory crackdown

Q11: On which blockchains can stablecoins be used?

A: Mainstream stablecoins typically support multiple blockchains:

• Ethereum: Most widely supported
• Binance Smart Chain (BSC): Low fees
• Polygon: Low fees, fast confirmation
• Arbitrum/Optimism: Layer 2 solutions
• Solana: High-performance blockchain
• Tron: Low fees

Q12: How to transfer stablecoins between different chains?

A: Transfer methods:

1. Cross-Chain Bridges: Use bridges to transfer stablecoins from one chain to another
2. Exchange Transfer: Deposit stablecoins on one chain, withdraw to another chain
3. Native Multi-Chain Support: Some stablecoins natively support multiple chains (e.g., USDC)

⚠️ Note: Cross-chain operations require fees and have certain risks.

Security Questions

Q13: Are stablecoins safe?

A: Stablecoin safety depends on multiple factors:

• Type: Fiat-collateralized relatively safer, algorithmic higher risk
• Issuer: Choose well-known, compliant issuers
• Audits: Check if professionally audited
• Reserve Transparency: Choose stablecoins with transparent reserves

No stablecoin is absolutely safe, choose based on risk tolerance.

Q14: How to securely store stablecoins?

A: Secure storage recommendations:

• Small Amounts: Use hot wallets (e.g., MetaMask)
• Medium Amounts: Use hardware wallets (e.g., Ledger)
• Large Amounts: Use multi-signature wallets
• Protect Mnemonic: Never leak or store in cloud

Detailed guide: Security Guide

Q15: Can stablecoins be hacked?

A: Possible risks include:

• Smart Contract Vulnerabilities: Protocol code may have vulnerabilities
• Wallet Theft: Personal wallets hacked
• Exchange Attacks: Centralized exchanges hacked
• Bridge Attacks: Cross-chain bridges may have vulnerabilities

Reduce Risk:

• Use audited stablecoins
• Use hardware wallets
• Diversify asset storage
• Follow security announcements

Q16: What if the stablecoin issuer goes bankrupt?

A: This depends on stablecoin type:

• Fiat-Collateralized: If reserves sufficient, can redeem fiat; if insufficient, may lose
• Crypto-Collateralized: If protocol runs normally, can redeem collateral
• Algorithmic: Higher risk, may completely lose

Recommendation: Choose well-known, compliant stablecoins and follow project updates.

Investment Questions

Q17: Can stablecoins be invested in?

A: Stablecoins are mainly used for:

• Store of Value: Maintain asset value in volatile markets
• Medium of Exchange: As intermediate currency for crypto trading
• Earning Returns: Earn interest through DeFi or CeFi

Stablecoins themselves are not investment products (stable price), but can earn returns through DeFi participation.

Q18: How to earn returns through stablecoins?

A: Main methods:

1. DeFi Returns: Provide liquidity, lending, etc. in DeFi protocols
2. CeFi Returns: Deposit stablecoins on centralized platforms to earn interest
3. Liquidity Mining: Provide liquidity on DEX to earn rewards
4. Lending: Lend stablecoins to earn interest

Detailed guide: Earning Guide

Q19: What is the yield rate of stablecoins?

A: Yield rates vary by platform and strategy:

• CeFi Platforms: Usually 3-10% annual yield
• DeFi Protocols: May be higher, but also higher risk
• Liquidity Mining: Yield fluctuates significantly, may be 5-50%+

⚠️ Note: High returns usually come with high risks, need careful evaluation.

Q20: Are stablecoins suitable for long-term holding?

A: Suitable, but need attention:

• Advantages: Stable price, suitable for long-term value storage
• Risks: Depegging risk, regulatory risk, technical risk
• Recommendation: Don't put all assets in one stablecoin, diversify holdings

Regulatory Questions

Q21: Are stablecoins legal?

A: Legality varies by country/region:

• United States: Some stablecoins regulated, e.g., USDC
• European Union: Developing stablecoin regulatory framework
• China: Prohibits cryptocurrency trading
• Other Countries: Regulatory policies vary

Recommend understanding local regulations and choosing compliant stablecoins.

Q22: Will stablecoins be banned?

A: Possibly, but probability varies by region:

• Complete Ban: Some countries may completely ban
• Strict Regulation: Most countries may strengthen regulation
• Compliance Requirements: May require KYC/AML

Response: Follow regulatory developments, choose compliant stablecoins, comply with local regulations.

Q23: Do stablecoins require KYC?

A: Depends on use case:

• Exchange Purchase: Usually requires KYC
• DEX Trading: Usually no KYC
• Large Transactions: May trigger KYC requirements
• Compliant Stablecoins: May require more KYC

Other Questions

Q24: What's the difference between stablecoins and CBDC (Central Bank Digital Currency)?

A: Main differences:

• Issuer: Stablecoins by private entities, CBDC by central banks
• Regulation: CBDC strictly regulated, stablecoin regulation developing
• Technology: CBDC may use different technology
• Use Cases: CBDC mainly for payments, stablecoins have wider uses

Q25: What are the future development trends of stablecoins?

A: Possible development trends:

• Strengthened Regulation: Countries may strengthen stablecoin regulation
• Compliance: More stablecoins seeking compliance
• Multi-Chain Support: Issued on more blockchains
• DeFi Integration: Deep integration with DeFi
• Payment Applications: More payment scenarios

Q26: How to choose the right stablecoin?

A: Consider factors:

• Use Case: Trading, DeFi, savings, etc.
• Risk Tolerance: Conservative choose USDC, aggressive choose DAI
• Transparency: Check audit reports and reserve proofs
• Liquidity: Choose stablecoins with high trading volume
• Regulatory Compliance: Choose compliant stablecoins

Q27: Can stablecoins be used in DeFi?

A: Yes, stablecoins are core assets of DeFi:

• Liquidity Provision: Provide liquidity on DEX
• Lending: As collateral or borrowed assets
• Yield Farming: Participate in various yield strategies
• Trading: As base assets for trading pairs

Q28: What are the fees for stablecoins?

A: Fees vary by network and operation:

• Ethereum Mainnet: Usually $5-50+ (depending on network congestion)
• Layer 2 (Arbitrum/Polygon): Usually $0.1-1
• BSC/Solana: Usually $0.01-0.1
• Exchanges: Usually 0.1-0.5% trading fee

Q29: Are there quantity limits for stablecoins?

A: Depends on stablecoin type:

• Fiat-Collateralized: Theoretically unlimited, depends on reserves
• Crypto-Collateralized: Depends on collateral amount
• Algorithmic: Supply controlled by algorithm

Q30: How to verify if a stablecoin is genuine?

A: Verification methods:

• Check Contract Address: Compare with officially published address
• Use Blockchain Explorer: Check token information on Etherscan, etc.
• Check Token Symbol: Confirm symbol and name are correct
• Use Official Channels: Obtain tokens from official channels

Need More Help?

If your question isn't answered here, you can:

1. 📖 Check Getting Started for more basics
2. 🔧 Check Technical Principles for technical details
3. 🔒 Check Security Guide for security practices
4. 💰 Check On-Ramp/Off-Ramp Guide for buying and selling
5. 💵 Check Earning Guide for earning returns

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Tip: The stablecoin market and technology continue to evolve, recommend staying updated on latest developments and best practices.