Stablecoins are crypto tokens designed to track the value of a currency such as the US dollar, and they are commonly used to price on-chain prediction market shares.
Why Stablecoins Are Used
Pricing shares in a dollar-tracking token keeps the $1.00 payout easy to understand, without the swings of other cryptocurrencies.
How They Keep Their Value
Different stablecoins use different methods, such as reserves held by an issuer. Each design has its own risks.
Risks to Know
A stablecoin can briefly trade below its target, and issuers can face problems. Treat stablecoins as useful tools, not as risk-free cash.
Worked Example
A trader holds 50 units of a dollar stablecoin and buys 100 YES shares at 30¢, spending 30 units. If the market resolves YES, they receive 100 units; if NO, the 30 units are gone. Their result is measured in the stablecoin.
Key Takeaways
- Stablecoins aim to track a currency.
- They keep share payouts simple.
- Each stablecoin design carries risk.
- Stable does not mean risk-free.