Glossary · assets and networks
What is a stablecoin?
A stablecoin is a digital asset designed to hold a fixed value against something else, almost always a national currency. One USDC is intended to be worth one US dollar, and one EURC one euro, whatever the rest of the crypto market is doing.
How the peg is actually held, and why that is the only question that matters
A stablecoin is a promise, and the interesting part is what backs it. There are three broad answers and they carry very different risk.
Reserve-backed. The issuer holds cash and short-term government debt equal to the coins in circulation, and redeems on demand. USDC and EURC work this way. The risk you are taking is on the issuer and its reserves, which is why regulation focuses here.
Crypto-collateralised. The coin is backed by other crypto, over-collateralised to absorb price movement. No bank involved, more moving parts, and the peg depends on the collateral holding up.
Algorithmic. The peg is maintained by a mechanism rather than by assets. Several have failed outright. Do not accept one as payment.
For a business the practical point is narrower than the theory. A reserve-backed stablecoin from a regulated issuer removes the price movement between invoice and settlement, which is the single biggest objection to taking crypto payments at all. That is why stablecoins now carry most business payment volume.
Types
Three ways a peg gets held
The differences are not academic. They decide what you are exposed to if something goes wrong.
| Model | How the peg holds | What you are exposed to | Accept as payment |
|---|---|---|---|
| Reserve-backed | Cash and short-term government debt, redeemable on demand | The issuer and the quality of its reserves | Yes |
| Crypto-collateralised | Over-collateralised with other crypto assets | The collateral holding its value, and the mechanism working under stress | With care |
| Algorithmic | A mechanism with no assets behind it | Total loss. Several have failed | No |
USDC and EURC, the two CoinGate supports, are in the first row.
What this changes for a merchant
Three effects, all of which show up in the numbers rather than in the technology.
The volatility objection disappears
An invoice for 500 EUR paid in EURC arrives as roughly 500 EUR of value. There is nothing to hedge and nothing to explain to finance.
Frequently asked questions
Which stablecoins can I accept with CoinGate?
USDC and EURC. USDT is not supported, which is worth knowing early because it is widely held. Current list
Is a stablecoin the same as a CBDC?
No. A stablecoin is issued by a company against reserves. A central bank digital currency is issued by a central bank and is state money. They are frequently confused and are not comparable propositions.
Can a stablecoin lose its peg?
Yes, and some have permanently. The risk is concentrated in how the coin is backed, which is why the three models above are worth telling apart before you accept one.
Why do most business crypto payments use stablecoins now?
Because the price movement between invoicing and settling was the main reason finance teams said no, and a reserve-backed stablecoin removes it.