Stable coins are cryptocurrencies that digitally represent a stable (underlying) value and guarantee value parity.
This can be, for example, fiat money (euro, US dollar, Japanese yen, ...) or commodities and precious metals (oil, wood, gold, ...). Each stable coin represents a certain amount (e.g. one ounce, one liter or one barrel). For this reason, Stable Coins fall under the category of crypto derivatives - they represent the tokenized representation of an underlying asset (e.g. euro or gold).
Stable Coins are very popular in all areas where volatility is not desired and are perfectly suited as a unit of account as well as for retail or commodity trading.
Stable Coins are designed to enable the rapid exchange of crypto assets into traditional assets and vice versa, without the need to leave the respective crypto platform/exchange. This is meant to simplify commodity and fiat currency trading and circumvent the volatile price fluctuations of cryptocurrencies. In addition, stable coins can help realize gains from other cryptocurrencies without having to exchange them for fiat currency - which comes with high costs as well as extensive regulations and KYC procedures.
For instance, instead of exchanging Bitcoin directly into Euros (which is limited to n=100 Bitcoin per day on most platforms), they can thus be exchanged into a stable coin that mirrors the Euro. The value gain is thus "parked" without having to leave the platform.
