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  "schemaVersion": "1.0.0",
  "id": "what-is-a-stablecoin",
  "canonical": "https://degreesofsatoshi.com/encyclopedia/what-is-a-stablecoin/",
  "collection": "stablecoins",
  "title": "What is a stablecoin? A target price and the system behind it",
  "description": "Stablecoins target a reference value using reserves, collateral or other mechanisms. Learn what the peg means and what a token holder actually owns.",
  "aliases": [
    "stablecoins",
    "stable coin"
  ],
  "dates": {
    "published": "2026-10-02",
    "modified": "2026-10-02",
    "verified": "2026-10-02T15:09:00.630Z",
    "dataAsOf": "2026-10-02"
  },
  "authorship": {
    "publisher": "Degrees of Satoshi editorial project",
    "process": "AI-assisted research and drafting with a separate automated source-verification pass; no external expert or named human review is implied."
  },
  "quickAnswer": {
    "text": "A stablecoin is a crypto asset designed to track a reference value, commonly one US dollar. The target is supported by a mechanism such as reserve-backed redemption or collateralized issuance; it is not a guarantee of its market price. Owning a token also does not automatically make you eligible to redeem it directly with its issuer.",
    "claimId": "what-is-a-stablecoin-quick-answer",
    "sourceIds": [
      "stablecoin-definition",
      "circle-terms"
    ]
  },
  "keyFacts": [
    {
      "label": "Reference value",
      "value": "The asset or unit the token aims to track; it need not be USD.",
      "sourceIds": [
        "stablecoin-definition"
      ],
      "id": "reference-value",
      "claimId": "what-is-a-stablecoin-fact-reference-value"
    },
    {
      "label": "Market price",
      "value": "The price available in a particular market can depart from the target.",
      "sourceIds": [
        "circle-terms"
      ],
      "id": "market-price",
      "claimId": "what-is-a-stablecoin-fact-market-price"
    },
    {
      "label": "Exit route",
      "value": "Direct redemption and selling to another trader are different routes.",
      "sourceIds": [
        "stablecoin-definition"
      ],
      "id": "exit-route",
      "claimId": "what-is-a-stablecoin-fact-exit-route"
    }
  ],
  "prerequisites": [],
  "sections": [
    {
      "id": "reference-and-mechanism",
      "heading": "Name the reference, then the mechanism",
      "sourceIds": [
        "stablecoin-definition",
        "sky-vat"
      ],
      "paragraphs": [
        "A useful description of a stablecoin has two parts: what one unit aims to buy, and how the system encourages that result. “One US dollar” supplies the first part. A bank reserve, a collateralized loan system or a trading strategy supplies the second. Two tokens can share the same reference while exposing their holders to quite different failures.",
        "In a reserve-backed model, an issuer takes in assets and creates tokens. In a collateralized protocol, a borrower can create tokens while locking assets and taking on debt. Those mechanisms need separate explanations: one rests heavily on redeeming an issuer claim, while the other also relies on valuations, collateral limits and liquidation."
      ]
    },
    {
      "id": "three-balances",
      "heading": "Keep the token, the backing and the bank balance separate",
      "sourceIds": [
        "erc20",
        "circle-terms"
      ],
      "paragraphs": [
        "Imagine a wallet showing 100 units of a dollar stablecoin. That is a token balance. It is not a statement that the wallet owner has a $100 bank deposit. The backing is held or managed elsewhere, and the path from token to bank money depends on the arrangement.",
        "A merchant can accept those 100 tokens as payment without either party redeeming them. If the merchant instead sells them at $0.99 each, the gross cash value is $99 before fees. The token balance, the intended reference value and the executable sale price answer three different questions."
      ]
    },
    {
      "id": "what-to-inspect",
      "heading": "A short route through the evidence",
      "sourceIds": [
        "circle-reserves",
        "sky-vat",
        "circle-bridged"
      ],
      "paragraphs": [
        "Identify the exact token and network, then read the mechanism and the exit conditions. For reserve-backed tokens, inspect the reserve report and redemption terms together. For collateralized tokens, inspect the accepted collateral, valuation method and liquidation process. A bridge adds another mechanism between a displayed balance and the underlying asset.",
        "Continue with [peg versus market price](/encyclopedia/stablecoin-peg-vs-market-price/) and [minting and redemption eligibility](/encyclopedia/stablecoin-minting-redemption-eligibility/). These explain why a plausible backing story does not, by itself, settle the price or accessibility of a particular holding."
      ]
    }
  ],
  "faq": [
    {
      "question": "Does stable mean risk-free?",
      "answer": "No. Stable describes the intended reference value. Market liquidity, redemption access, backing and software can still fail.",
      "sourceIds": [
        "stablecoin-definition",
        "circle-risk"
      ]
    },
    {
      "question": "Does a dollar stablecoin pay interest?",
      "answer": "Not necessarily. For example, USDC itself does not give its holder the interest earned by its reserve. A yield product is an additional arrangement.",
      "sourceIds": [
        "circle-terms"
      ]
    }
  ],
  "claims": [
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      "id": "what-is-a-stablecoin-quick-answer",
      "articleSlug": "what-is-a-stablecoin",
      "statement": "A stablecoin is a crypto asset designed to track a reference value, commonly one US dollar. The target is supported by a mechanism such as reserve-backed redemption or collateralized issuance; it is not a guarantee of its market price. Owning a token also does not automatically make you eligible to redeem it directly with its issuer.",
      "sourceIds": [
        "source-3869f308765efb15",
        "source-3f274c8c1e62ebb9"
      ],
      "sourceLocators": [
        {
          "sourceId": "source-3869f308765efb15",
          "locator": "Introduction and Description of Covered Stablecoins"
        },
        {
          "sourceId": "source-3f274c8c1e62ebb9",
          "locator": "Sections 1–4 and 13–16"
        }
      ],
      "scope": {
        "collection": "stablecoins",
        "dataAsOf": "2026-10-02",
        "blockHeight": null
      },
      "qualification": "",
      "evidenceStatus": "documented",
      "verification": {
        "status": "verified",
        "method": "independent automated source review",
        "checkedAt": "2026-10-02T15:09:00.630Z",
        "reviewer": "automated independent verification",
        "notes": [
          "SEC general definition supports multiple reference assets and mechanisms; Circle terms sections 1–4 distinguish eligible redemption from holding.",
          "Checked 100 tokens sold at $0.99 = $99; example is labeled illustrative."
        ]
      }
    },
    {
      "id": "what-is-a-stablecoin-fact-reference-value",
      "articleSlug": "what-is-a-stablecoin",
      "statement": "Reference value: The asset or unit the token aims to track; it need not be USD.",
      "sourceIds": [
        "source-3869f308765efb15"
      ],
      "sourceLocators": [
        {
          "sourceId": "source-3869f308765efb15",
          "locator": "Introduction and Description of Covered Stablecoins"
        }
      ],
      "scope": {
        "collection": "stablecoins",
        "dataAsOf": "2026-10-02",
        "blockHeight": null
      },
      "qualification": "",
      "evidenceStatus": "documented",
      "verification": {
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        "checkedAt": "2026-10-02T15:09:00.630Z",
        "reviewer": "automated independent verification",
        "notes": [
          "SEC general definition supports multiple reference assets and mechanisms; Circle terms sections 1–4 distinguish eligible redemption from holding.",
          "Checked 100 tokens sold at $0.99 = $99; example is labeled illustrative."
        ]
      }
    },
    {
      "id": "what-is-a-stablecoin-fact-market-price",
      "articleSlug": "what-is-a-stablecoin",
      "statement": "Market price: The price available in a particular market can depart from the target.",
      "sourceIds": [
        "source-3f274c8c1e62ebb9"
      ],
      "sourceLocators": [
        {
          "sourceId": "source-3f274c8c1e62ebb9",
          "locator": "Sections 1–4 and 13–16"
        }
      ],
      "scope": {
        "collection": "stablecoins",
        "dataAsOf": "2026-10-02",
        "blockHeight": null
      },
      "qualification": "",
      "evidenceStatus": "documented",
      "verification": {
        "status": "verified",
        "method": "independent automated source review",
        "checkedAt": "2026-10-02T15:09:00.630Z",
        "reviewer": "automated independent verification",
        "notes": [
          "SEC general definition supports multiple reference assets and mechanisms; Circle terms sections 1–4 distinguish eligible redemption from holding.",
          "Checked 100 tokens sold at $0.99 = $99; example is labeled illustrative."
        ]
      }
    },
    {
      "id": "what-is-a-stablecoin-fact-exit-route",
      "articleSlug": "what-is-a-stablecoin",
      "statement": "Exit route: Direct redemption and selling to another trader are different routes.",
      "sourceIds": [
        "source-3869f308765efb15"
      ],
      "sourceLocators": [
        {
          "sourceId": "source-3869f308765efb15",
          "locator": "Introduction and Description of Covered Stablecoins"
        }
      ],
      "scope": {
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        "dataAsOf": "2026-10-02",
        "blockHeight": null
      },
      "qualification": "",
      "evidenceStatus": "documented",
      "verification": {
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        "checkedAt": "2026-10-02T15:09:00.630Z",
        "reviewer": "automated independent verification",
        "notes": [
          "SEC general definition supports multiple reference assets and mechanisms; Circle terms sections 1–4 distinguish eligible redemption from holding.",
          "Checked 100 tokens sold at $0.99 = $99; example is labeled illustrative."
        ]
      }
    }
  ],
  "sources": [
    {
      "id": "stablecoin-definition",
      "label": "SEC Division of Corporation Finance: Statement on Stablecoins",
      "publisher": "U.S. Securities and Exchange Commission",
      "url": "https://www.sec.gov/newsroom/speeches-statements/statement-stablecoins-040425",
      "note": "Definition and intended reference asset; statement has explicitly limited scope, not a general legal classification.",
      "checkedAt": "2026-10-02T14:41:32.877120+00:00",
      "locator": "Introduction and Description of Covered Stablecoins",
      "recordId": "source-3869f308765efb15",
      "contentSha256": null,
      "version": null
    },
    {
      "id": "circle-terms",
      "label": "USDC Terms",
      "publisher": "Circle",
      "url": "https://www.circle.com/legal/usdc-terms",
      "note": "USDC backing, conditional redemption, price fluctuations, no intrinsic interest, freezes, fees and eligibility.",
      "checkedAt": "2026-10-02T14:38:29.678281+00:00",
      "locator": "Sections 1–4 and 13–16",
      "version": "Response SHA-256 23312ae7a14fc5e876bce04cbc739e473da466c4a2ae2a35531ffc4cda972ca8",
      "recordId": "source-3f274c8c1e62ebb9",
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    {
      "id": "sky-vat",
      "label": "Vat: Core Accounting",
      "publisher": "Sky Protocol",
      "url": "https://developers.skyeco.com/protocol/core/vat/",
      "note": "Collateralized issuance, debt accounting, oracle and governance dependencies.",
      "checkedAt": "2026-10-02T14:38:38.888971+00:00",
      "locator": "Vault Management; Failure Modes; Accounting",
      "version": "Response SHA-256 78db21089399df6c25df458f98d0129333f3e72138de185b96610fe82f0a74dd",
      "recordId": "source-69368320969c12c1",
      "contentSha256": null
    },
    {
      "id": "erc20",
      "label": "ERC-20 Token Standard",
      "publisher": "Ethereum Improvement Proposals",
      "url": "https://eips.ethereum.org/EIPS/eip-20",
      "note": "On-chain token ledger operations do not themselves initiate bank payouts.",
      "checkedAt": "2026-10-02T14:38:58.506966+00:00",
      "locator": "Methods: transfer, transferFrom, approve; Events",
      "version": "Response SHA-256 98bda5e4707841a68684879878c4c165fdaa47d89ed69ebf232ab9be06ff050e",
      "recordId": "source-ac4ad503a55127bb",
      "contentSha256": null
    },
    {
      "id": "circle-reserves",
      "label": "USDC and EURC transparency",
      "publisher": "Circle",
      "url": "https://www.circle.com/transparency",
      "note": "Reserve categories, dated third-party reports, distinction between circulation and assets.",
      "checkedAt": "2026-10-02T14:38:29.678364+00:00",
      "locator": "Balances; Monthly assurance and transparency",
      "version": "Response SHA-256 c309c9d5d4475f82930927a407a8e895e9e7a9e0da0de6901562892c33385209",
      "recordId": "source-0040950f540a1520",
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    {
      "id": "circle-bridged",
      "label": "Third-Party Bridged USDC Terms",
      "publisher": "Circle",
      "url": "https://www.circle.com/legal/bridged-usdc-terms",
      "note": "Bridged tokens and native USDC differ in issuer relationship and bridge dependency.",
      "checkedAt": "2026-10-02T14:38:48.775643+00:00",
      "locator": "Scope; risks and bridge conversion",
      "version": "Response SHA-256 aeeeba497c6a8aaa31c70867b65eff818ef40eb2e96e7a890c49d48893974137",
      "recordId": "source-4f0a8db3369a736a",
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    {
      "id": "circle-risk",
      "label": "USDC Risk Factors",
      "publisher": "Circle",
      "url": "https://www.circle.com/legal/usdc-risk-factors",
      "note": "Operational, banking and transfer restrictions.",
      "checkedAt": "2026-10-02T14:38:29.678429+00:00",
      "locator": "Blocked Addresses; Software protocols; Claim on funds",
      "version": "Response SHA-256 0b2c30c7cbbb8058626ad7023b2c5282cb99b5bf95216d97010979846ce0e073",
      "recordId": "source-f0ded1628723f35a",
      "contentSha256": null
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  ],
  "related": {
    "articles": [
      "stablecoin-peg-vs-market-price",
      "cash-backed-stablecoins",
      "crypto-backed-stablecoins",
      "stablecoin-minting-redemption-eligibility",
      "non-dollar-stablecoins",
      "stablecoins-vs-cbdcs"
    ],
    "dossiers": [],
    "wallets": []
  },
  "revisionHistory": [
    {
      "date": "2026-10-02",
      "kind": "published",
      "summary": "First publication after primary-source research and independent automated verification."
    }
  ],
  "citation": "Degrees of Satoshi editorial project. “What is a stablecoin? A target price and the system behind it.” Published 2026-10-02; updated 2026-10-02. https://degreesofsatoshi.com/encyclopedia/what-is-a-stablecoin/"
}