# 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: 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: ``` GET https://wp.isc.money/introduction/why-isc-matters/state-of-stablecoins/what-is-a-stablecoin.md?ask= ``` The question should be specific, self-contained, and written in natural language. 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.