1) Stablecoins: Issuance, Collateral & Redemption (read this first)
- Issuer & Minting: Tokens are minted when dollars (or equivalent) are received by the issuer.
- Collateral: Backed by cash, T-bills, MMFs, or on-chain assets. Reserves ≈ circulating supply.
- Redemption (1:1): Authorized users can return 1 token for ~$1 from the issuer.
- Peg logic: Arbitrage via mint/redeem pulls market price toward $1 when liquidity works.
- Use-case: Payments/settlement rails; not an investment for price appreciation.
Quick example
Alice wires $10,000 → issuer mints 10,000 tokens to Alice. Later she redeems tokens → issuer wires ~$10,000 back (less fees).
Key risks
- De-peg: Confidence or liquidity shock can move price away from $1.
- Liquidity: Can the issuer meet large redemptions quickly?
- Transparency: Frequency/quality of attestations or audits.
- Legal/ops: Who may redeem? Fees/limits/timelines? Jurisdiction?
2) Stablecoins — What, Why, How
What is a stablecoin?
A token designed to track a reference (usually the U.S. dollar). Users like the “crypto-speed” of transfers with less price volatility.
Why people use them
- Fast, low-friction settlement across exchanges and borders.
- Bridge between traditional dollars and crypto apps.
- Familiar $ accounting for invoices and payroll.
How they keep the peg (models)
| Model | Backing | Notes |
|---|---|---|
| Fiat-backed | Cash, bank deposits, T-bills, MMFs | Redeemable $1 in/$1 out with issuer. Needs liquidity & disclosures. |
| Crypto-collateralized | On-chain collateral (e.g., ETH) | Over-collateralized; liquidation engines & oracle design matter. |
| Algorithmic | Rules/market incentives | No/partial collateral; historically fragile in stress. |
3) Who Makes Stablecoins & Who Profits?
Who creates them?
- Fiat-backed issuers mint/burn against dollars or cash equivalents with banks/custodians.
- Crypto-collateral protocols (e.g., MakerDAO/DAI) mint against on-chain collateral.
- Payments brands (e.g., PayPal PYUSD via Paxos) integrate into existing networks.
How do issuers earn money?
- Interest on reserves (the float) from cash/T-bills/MMFs.
- Fees on issuance/redemption and institutional services.
- Scale effects: larger supply → larger interest income (minus costs).
Founders typically profit via equity in the issuer/company or protocol tokens—not by “printing money.”
4) Can I Create a Stablecoin?
Fiat-backed checklist
- Compliant entity; KYC/AML & licensing where needed.
- Banking/custodians for reserves; risk & liquidity policies.
- Smart contracts: mint/burn/blacklist/upgrade policies; audits.
- Frequent attestations (ideally audits) on reserves.
- Redemption SLAs, fees; market makers & exchange listings.
Crypto-collateral model
- Over-collateralization; robust oracles; liquidation engines.
- Expect higher capital costs and potential de-peg under stress.
Avoid reflexive algorithmic designs without hard collateral—they repeatedly failed in practice.
5) Popular USD Stablecoins
| Token | Type | Issuer/Manager | Typical Reserves | Redemption | Notes |
|---|---|---|---|---|---|
| USDT | Fiat-backed | Tether | Cash, T-bills, MMFs | KYC’d via issuer | Largest by market cap; verify attestations. |
| USDC | Fiat-backed | Circle | Cash & short-dated U.S. Treasuries | KYC’d via issuer | Frequent disclosures; broad integrations. |
| DAI | Crypto-collateral (hybrid) | MakerDAO | On-chain collateral + RWA exposure | On-chain mechanisms | Over-collateralized with liquidations. |
| PYUSD | Fiat-backed | PayPal (Paxos) | Cash & U.S. Treasuries | Issuer terms | Payments-focused integrations. |
Always check the latest reserve attestations and redemption policies on official sites.
6) USDT Peg History (live)
Live chart via TradingView (USDT/USD).
7) UST (TerraClassicUSD) — Post-Peg Price (live)
Former algorithmic “stablecoin” that de-pegged in 2022, shown for comparison only.
8) Policy Snapshot — U.S. & Global (very brief)
United States
- Focus on reserves, redemption, disclosures and AML obligations.
- Banking (Fed/FDIC/OCC) + market regulators (SEC/CFTC) + Treasury/FinCEN).
Selected international
- EU MiCA — comprehensive regime for issuers/service providers.
- UK, Singapore, Hong Kong — frameworks emphasizing reserves & redemption.
9) Stablecoin Flow & Aggregates (interactive)
Pick an activity; arrows show directional changes (Up/Down/—) in U.S. aggregates based on stylized flows.
Activities
Result
MB
—
M1
—
M2
—
Choose an activity.
Assumption:
10) Stability Simulator — Guided Lesson
Lesson Helper
Stability Score: —
Pick a setup and click “Explain This Scenario”.
Use the playground on the right; then set the same conditions on the left and click Explain for a verdict.
11) Student Q&A — Stablecoins
Are stablecoins “safe”?
Depends on reserves, transparency, redemption, and jurisdiction. Keep transactional balances small; prefer cash/T-bill-backed issuers with frequent attestations.
Should I buy one to invest?
They aim to stay $1; think convenience, not appreciation. High APYs = higher risk; understand the source of yield.
What if the peg breaks?
Check issuer comms & attestations; if eligible, redeem 1:1; otherwise weigh market price vs. risk and diversify issuer exposure.