Stablecoins leverage blockchain technology to create a digital asset that combines the stability of traditional currencies with the advantages of cryptocurrencies. Here’s how stablecoins work with blockchain technology:
Blockchain Foundation
Stablecoins are built on existing blockchain networks, with Ethereum being the most popular platform. However, they can also operate on other blockchains like Solana, Tron, or even Bitcoin (through recent innovations like Taproot Assets) (1).
Smart Contracts
The core functionality of stablecoins is typically implemented through smart contracts. These are self-executing programs stored on the blockchain that manage:
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- Issuance and redemption of tokens
- Collateral management (for collateralized stablecoins)
- Price stability mechanisms
Key Blockchain Features Utilized
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