# What are stablecoins? Why are they important? {% hint style="info" %} The following paragraphs were taken, with permission from the author, from the [chapter about stablecoins](https://link.springer.com/referenceworkentry/10.1007/978-3-642-27739-9_1671-1) in the [Encyclopedia of Cryptography, Security and Privacy](https://link.springer.com/referencework/10.1007/978-3-642-27739-9) . {% endhint %} ## What are stablecoins? In the narrowest sense, a stablecoin is a cryptocurrency that has its price pegged to a fiat currency (e.g. USD) and is fully backed by reserves denominated in the same fiat currency. More broadly, a stablecoin can be defined as a digital asset that has mechanisms to maintain a low deviation of its price from a target price. ## Why are stablecoins important? Since the invention of bitcoin and other cryptocurrencies, a major obstacle for their wider adoption and recognition as proper currencies, particularly as means of exchange and units of account, has been the instability (volatility) of their price in relation to fiat currencies. Therefore, if we are serious about creating cryptocurrencies that are really currencies, we must seek to create stablecoins in the broader sense, to overcome the obstacle of volatility. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.stability.nexus/stablecoins/what-are-stablecoins-why-are-they-important.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.