this post was submitted on 12 Aug 2025
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Explain Like I'm Five
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Think of it like casino chips for crypto. If you want to buy lesser known cryptocurrency, no one is trading directly for dollars, the trades are happening from one crypto to another. You spend your actual cash to buy in, then you can cash out when you are done. But if you are trading all the time, looking for opportunities, you don't want to just leave everything parked on some random cryptocurrency, because it's highly volatile. Stable coins are like the casino chips because they hold a relatively stable value, so you have your money in those and it's ready to trade whenever the need arises.
Stable coins can hold a stable value because they are usually backed by some actual assets like money and securities and stuff.
So their utility is that they are a form of USD that can easily interact with cryto markets.
Except that you have some anonymous strangers who pinky swear that they have said real-wolrd-asset backing.
There've been more than enough instances where said backing just didn't exist.
Especially recent history has shown that stable coins should actually be written "stable" coins. The analogy to casino chips is also a bit weak because casinos (in many countries including the USA) are highly regulated by the government. An example of a USA law is that if a casino goes out-of-business, the cash assets that were set aside must be made available for people that were still holding that casino's chips so the person can turn them back into cash. No such rule exists for crypto "stable" coins.
When a "stable" coin goes under, you lose your money just like a non-"stable" coin. There are numerous examples from the last 5 years:
Most Expensive Stablecoin Crashes: The Biggest Collapses That Shook the Crypto Market
isn't that how economic crises start or something.......?
Basically, yeah
In the US if a police finds cash on you they can steal it via Civil Asset Forfiture. Some police departments near airports rely on this income for funding.
If the US Feds label you a terrorist, without trial they can either freeze or steal the money you have in US owned or US friendly banks.
If Visa and MasterCard don't like something they might prevent you from making a purchase with your debit card. Such as X-rated games and movies.
The promise of stable coins is meant as a work around to these kinds of issues. In reality you have to trust the stable coin issuer more then the US Feds.