> For the complete documentation index, see [llms.txt](https://wp.isc.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://wp.isc.money/introduction/why-isc-matters/state-of-stablecoins/what-is-a-stablecoin.md). # What is a Stablecoin? Stablecoins are a type of cryptocurrency that pegs its value to another currency, commodity, or financial instrument. This makes them preferable as a medium of exchange compared to other cryptocurrencies, such as Bitcoin and Ethereum, whose value can be highly volatile and are therefore impractical to use as a currency. The most popular stablecoins are pegged to the US Dollar. **How are USD-Pegs Maintained?** All stablecoins that are pegged to the value of the US Dollar are set at a value of one US Dollar ($1.00). Despite this point of commonality, various methods are used to maintain this peg. The three most common methods are: **fiat-collateralization**, where the stablecoin is backed by a reserve of fiat currency and/or cash equivalents; **crypto-collateralization**, where the stablecoin is backed by a reserve of cryptocurrencies; and **algorithmic**, where a combination of dynamic collateralization, dynamic minting and burning, and overcollateralization are employed to maintain the peg. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://wp.isc.money/introduction/why-isc-matters/state-of-stablecoins/what-is-a-stablecoin.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.