Stablecoins have a wide range of applications, both within the crypto ecosystem and for broader financial activities. In this lesson, we’ll explore some of the most common ways you can use stablecoins, and trust me, you don’t have to be a crypto trader.

1. Trading and Hedging

Unlike Bitcoin and other unpegged cryptocurrencies, the value of stablecoins does not experience wide price swings (unless there is a problem). You can hold them like digital dollars and know they’ll stay close to $1. As a result, traders often convert their volatile crypto assets (like Bitcoin or Ethereum) into stablecoins during periods of high volatility or market downturns to "park" their funds without converting back to fiat currency. This allows them to stay within the crypto ecosystem and re-enter positions when desired.

2. Sending and Receiving Money Across Borders

Stablecoins enable fast, low-cost international payments and remittances, bypassing traditional banking systems that can be slow and expensive. This is particularly beneficial for individuals sending money across borders or businesses with global operations.

One very notable use case in this regard is paying remote workers. Workers can receive their payments anywhere in the world, plus the transfer arrives within minutes and without the extra bank charges.

3. Using Stablecoins in DeFi

Stablecoins can earn you passive income in DeFi. You can lend your stablecoins on platforms like Aave or Compound to earn interest (yield farming) or use them as collateral to borrow other assets. You can also provide stablecoins to liquidity pools on DEXs to earn trading fees and rewards. Comparatively, they can give better returns than traditional banks, but carry significant risks.

4. Saving in Stablecoins (vs. Traditional Savings)

In countries with high inflation or unstable local currencies, stablecoins pegged to stronger currencies (like the USD) can act as a more stable store of value, protecting purchasing power. However, it is important to choose reliable stablecoins and safe wallets.