Stablecoin Terms You Should Know: A Beginner’s Glossary

You may have seen a headline saying “stablecoin X has depegged”, or spotted “Mint” and “Redeem” buttons in an app, and wondered what they actually mean. You are not alone. Most of these terms come straight from crypto jargon, and the platforms that use them rarely stop to explain. Stablecoin terms are the vocabulary used to describe how stablecoins are issued, how their value is held steady, and how they are stored and traded. Related terms are grouped into sections, so you can jump straight to what you need from the table of contents. If you want more depth, follow the links to the relevant Akademi IDRX articles.

Why stablecoin terms matter

Misreading a single term can lead you to misjudge risk. Here is a common example. Someone reads that a stablecoin “has been audited” and concludes its reserves must be safe. But the audit may have covered only the program code, while the reserve money itself may never have been checked by an outside party.

Basic terms

Stablecoin

A stablecoin is a crypto asset designed to keep a stable value by being tied to a reference asset, usually a currency such as the US dollar or the Rupiah. Bitcoin’s price can move several percent in a day. Stablecoins are built to avoid that, so they behave more like a shopping voucher with its face value printed on it. The full explanation is in What Is a Stablecoin?.

Peg

A peg is the value a stablecoin is anchored to. A Rupiah stablecoin with a 1:1 peg means one token is designed to be worth Rp1. On the market its price can still drift slightly, say to Rp0.998 or Rp1.002. What pulls it back to Rp1 is the mechanism behind it, mainly reserves and the right to redeem. How the peg is maintained is covered in How a Rupiah Stablecoin Works.

Fiat-Backed, Crypto-Backed, and Algorithmic

These three labels describe what holds a stablecoin’s value in place:

• Fiat-backed stablecoins are backed by reserves of currency and cash equivalents held by the issuer.
• Crypto-backed stablecoins are backed by other crypto assets, usually locked at a value higher than the stablecoins issued (overcollateralized).
• Algorithmic stablecoins rely on code rules and market incentives to hold the price, with small reserves or none at all.

A full comparison is in Types of Stablecoins.

Token lifecycle terms

Minting

Minting is the process of creating new stablecoin tokens. With a fiat-backed stablecoin, new tokens are created after the issuer receives the matching amount of money. Think of an arcade: you only get your tokens once the cashier has your money.

Burning

Burning is the opposite of minting: tokens are permanently removed from circulation. Burned tokens are either sent to an address no one can access or destroyed through a smart contract function. Burning usually happens when a holder exchanges tokens back into regular money, which keeps the number of tokens in circulation in line with the reserves.

Redemption

Redemption means exchanging a stablecoin back into its reference asset, for example turning Rupiah tokens into Rupiah in a bank account. As long as holders are confident that one token can be exchanged for Rp1, there is little reason to sell it for less than Rp1. That is why the right to redeem helps hold the peg. Terms vary between issuers. Some require identity verification, some set a minimum amount, and processing times differ.

Circulating supply

Circulating supply is the number of tokens currently in circulation. For a fiat-backed stablecoin, this figure should not exceed the value of the reserves. You can compare the two yourself: circulating supply is visible on the blockchain, while reserve figures appear in the issuer’s reports.

Reserve and transparency terms

Reserves

Reserves are the assets an issuer holds to back every fiat-backed stablecoin token in circulation. They can take the form of cash in bank accounts, time deposits, or short-term government securities. Cash can be paid out immediately, while other assets have to be sold first. When many people redeem at once, that difference decides how quickly the issuer can pay.

Attestation vs audit

These two terms are the ones most often mixed up. Both involve an independent examiner, but what gets examined is different. There is also a third kind of audit that often comes up in the same breath: a code security audit.

Aspect	Reserve Attestation	Financial Statement Audit	Smart Contract Security Audit
What is examined	The amount and type of reserves on a specific date	The company’s full financial statements over a period	The token’s program code
Examiner	Independent accounting firm	Public accounting firm	Blockchain security firm
Question answered	Do the reserves match the tokens in circulation at that moment?	Are the financial statements fairly presented?	Does the code have exploitable flaws?
Limitation	Only a snapshot of one point in time	Broad scope, usually done annually	Does not assess reserves at all

When a stablecoin announces that it “has been audited”, check which kind of audit it was and the date of the report.

Proof of reserve

Proof of reserve is evidence that the reserves exist, updated on a regular basis. Some issuers publish it directly on the blockchain through an oracle. The goal is the same as an attestation, but the data is refreshed more often. That data still has to come from a trustworthy party. A number shown on-chain is only as accurate as its source.

Transparency report

A transparency report is a regular report from the issuer on the number of tokens in circulation, the composition of reserves, and the results of third-party checks. How to read one is covered in Stablecoin Risks and How to Assess Them.

Depeg: the term most worth understanding

What is a depeg?

A depeg happens when a stablecoin’s market price breaks away from its peg. A dollar stablecoin trading at 97 cents, or a Rupiah stablecoin trading at Rp0.95, is depegged.

Not every depeg is equally serious. A temporary depeg happens when the price drops because of panic or a surge in transactions and then recovers within hours or days. A structural depeg happens when the price never comes back because the mechanism behind it has broken. The cause might be insufficient reserves or a failed algorithmic design.

Why do depegs happen?

Common triggers include:

• The market doubts that the reserves are complete, or worries that they cannot be turned into cash quickly.
• A redemption run, where many holders redeem at the same time. It looks a lot like a queue of customers at a bank caught up in rumors.
• Thin liquidity, so that one large trade can move the price a long way.
• A fragile design. An algorithmic stablecoin without adequate reserves only holds up while the market believes in it. Once that belief is gone, the mechanism collapses with it.

Arbitrage as a stabilizer

Arbitrage means buying an asset where it is cheaper and selling or redeeming it where it is worth more. For fiat-backed stablecoins, arbitrage helps hold the peg. Say the token drops to Rp0.98 on the market. Anyone with redemption access can buy it there, redeem it with the issuer for Rp1, and keep a Rp0.02 spread per token before fees. That buying pushes the price back up. The catch is that redemption has to work smoothly and the reserves have to be real. If either one stalls, arbitrage stops working.

Two depeg case studies

TerraUSD (UST), May 2022. UST was an algorithmic stablecoin that held its value through a companion token, LUNA. The system let users swap 1 UST for US$1 worth of LUNA. In early May 2022, a series of large trades on a decentralized exchange knocked UST off its peg. UST holders rushed to swap into LUNA, LUNA’s supply ballooned, and its price fell close to zero. Research by Federal Reserve staff notes that around US$50 billion worth of UST and LUNA fell to practically nothing in roughly a week (Badev & Watsky, 2023). UST never returned to its peg.

USDC, March 2023. USDC is a fiat-backed stablecoin. When Silicon Valley Bank (SVB) in the United States was shut down on 10 March 2023, USDC’s issuer confirmed that US$3.3 billion of its reserves, about 8% of the total, was held at that bank. The market panicked, and USDC briefly fell below 90 cents on 11 March. After US authorities announced that SVB deposits would remain accessible, USDC returned to nearly US$1 within a few days.

Both cases started with a loss of confidence, but they ended very differently. USDC had real reserves, and most of them were unaffected, so once the SVB problem was resolved its price recovered. UST depended on LUNA, a token whose value collapsed at the same time, so nothing was left to break the fall. The USDC case also shows that where reserves are kept matters. Even complete reserves can trigger panic if part of them is stuck at a troubled bank.

Blockchain technical terms

On-chain vs off-chain

On-chain refers to activity recorded directly on a blockchain and visible to the public, such as a stablecoin transfer between wallets. Off-chain refers to activity outside the blockchain, such as a Rupiah transfer between banks or an exchange’s internal bookkeeping. A fiat-backed stablecoin always involves both. The tokens live on the blockchain, while the reserves sit with banks or custodians. That is why reserve reports are needed: you cannot check the off-chain part yourself through the blockchain.

Smart contract

A smart contract is a program that runs on a blockchain and executes rules automatically. For a stablecoin, the smart contract governs who can create tokens, how tokens are burned, and how they move. It works like a vending machine. Put in the exact amount and the drink comes out, and nobody can change the rules halfway through.

Wallet: custodial vs non-custodial

A wallet holds access to your crypto assets. What it actually stores is your private key, the secret code that proves ownership.

Aspect	Custodial Wallet	Non-Custodial Wallet
Who holds the private key	A third party (for example an exchange)	You
If you forget your password	Can be recovered through the provider	Lost if the recovery phrase (seed phrase) is also lost
Control over assets	Depends on the provider	Fully yours
Suited to	Beginners, trading on an exchange	Users ready to manage their own security

Gas fees

Gas fees are what you pay to have a transaction processed on a blockchain. They go to the network, not to the stablecoin issuer, and the amount varies by blockchain and by how busy the network is. Gas fees are usually paid in the network’s native crypto asset, so you need a small amount of it in your wallet before you can send a stablecoin.

Layer 1 and Layer 2

A layer 1 is a base blockchain that processes and secures its own transactions, such as Ethereum or Solana. A layer 2 is a network built on top of a layer 1 to make transactions faster and cheaper. Transactions on a layer 2 are processed separately, and a summary is then recorded on the layer 1. Base is an example of a layer 2 built on Ethereum.

One point that often causes confusion: a token on a layer 2 is not automatically the same as a token on the layer 1. IDRX on Base is a token on the Base network. When sending or receiving, make sure the network selected in your wallet matches the one on the exchange. If they differ, your funds may not arrive.

Multi-chain and bridges

Multi-chain means a single stablecoin is available on several blockchains at once. A bridge is a service that moves tokens from one blockchain to another. Bridges are convenient, but they add another smart contract to the process, and that means another point that can be attacked. Several of the largest hacks in crypto have hit bridges. If you need to move a stablecoin between networks, use the bridge the issuer provides or recommends.

Oracle

An oracle is a service that brings data from outside the blockchain onto it, such as asset prices or reserve data. Smart contracts cannot read real-world data on their own, so they depend on oracles. Crypto-backed stablecoins rely heavily on price oracles to decide when collateral must be liquidated.

Market terms

CEX vs DEX

Aspect	CEX (Centralized Exchange)	DEX (Decentralized Exchange)
Operated by	A company	Smart contracts
Account	Registration and identity verification required	Just connect a wallet
Asset custody	Usually custodial	Non-custodial
How prices form	An order book	Usually a liquidity pool

Trading pair

A trading pair is two assets that can be swapped for each other on an exchange, for example a Rupiah stablecoin and a dollar stablecoin. If the pair you need is not available, you have to swap twice through an intermediate asset, and each swap costs something.

Liquidity and slippage

Liquidity describes how easily an asset can be bought or sold without moving its price too far. Slippage is the gap between the price you expect and the price you actually get. Say you want to swap Rp50 million worth of stablecoins in a pool that only holds a few hundred million. A trade that size can move the price, so you receive a little less than expected. In thin markets, this kind of price movement is often what shows up as a small depeg.

How these terms apply to IDRX

IDRX is a Rupiah-based stablecoin pegged 1:1 to the Rupiah and backed by fiat reserves and government securities. Individual users can mint IDRX directly at home.idrx.co. You pay in Rupiah, and IDRX is sent to the wallet address and network you choose. Redemption works the other way around: IDRX is burned through the platform, and Rupiah is sent to your bank account. IDRX’s documentation warns that tokens burned outside the official platform are lost permanently, so redemptions back to Rupiah should go through the official channel only.

For transparency, IDRX publishes its transparency and audit documents on the IDRX documents page. Separately, IDRX’s smart contract has undergone a security assessment by CertiK. As the table in the reserves section shows, these two documents answer different questions, so it is worth reading both.

IDRX is also available on several blockchains, including Base, a layer 2 built on Ethereum. The official list of networks and contract addresses is at docs.idrx.co. Check the contract address before you transact, because anyone can create a fake token with a similar name.

Conclusion

Most of the terms on this page answer one of two questions: how a stablecoin’s value is held steady, and how tokens change hands. Minting, burning, redemption, reserves, and attestation belong to the first question. Wallets, gas fees, bridges, DEXs, and liquidity belong to the second. A depeg can start from a problem on either side, whether doubtful reserves or a market that is too thin.

The next time you read about a stablecoin depegging, check what type of stablecoin it is, where its reserves are kept, and when those reserves were last examined. Those three answers are usually enough to tell whether the problem is temporary or serious. The next article in this series, IDRX: How It Works and How to Access It, looks at how these concepts are applied in IDRX.

FAQ

What is a stablecoin depeg? A depeg is when a stablecoin’s market price breaks away from its peg, for example a Rupiah stablecoin trading below Rp1. A depeg can be temporary or structural.

What is the difference between minting and burning? Minting creates new tokens when money comes in to the issuer. Burning destroys tokens when they are exchanged back into regular money. Together they keep the number of tokens in circulation in line with the reserves.

Does a CertiK audit mean a stablecoin’s reserves are safe? No. A CertiK audit or security assessment checks the security of the smart contract code. Whether the reserves exist and are sufficient is checked through a separate attestation or transparency report.

What is the difference between an attestation and an audit? A reserve attestation checks the amount of reserves on one specific date. A financial statement audit examines the company’s full financial statements over a period, with a broader scope.

Can a stablecoin that has depegged return to its peg? Yes, if the cause is temporary and the reserves are adequate, as with USDC in March 2023. If the mechanism behind the peg breaks, as with UST in May 2022, the price may never recover.

What is stablecoin redemption? Redemption is exchanging a stablecoin back into its reference asset, for example turning Rupiah tokens into Rupiah in a bank account, through the issuer or its official platform.

References

1. Badev, A., & Watsky, C. (2023). Interconnected DeFi: Ripple Effects from the Terra Collapse. Finance and Economics Discussion Series 2023-044. Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/econres/feds/files/2023044pap.pdf
2. Circle. (12 March 2023). $3.3 Billion of USDC Reserve Risk Removed, Dollar De-peg Closes. https://www.circle.com/pressroom/3-3-billion-of-usdc-reserve-risk-removed-dollar-de-peg-closes
3. CNBC. (13 March 2023). Stablecoin USDC nearly regains $1 peg after Circle says $3.3 billion SVB deposit is available. https://www.cnbc.com/2023/03/13/usdc-nearly-regains-1-peg-after-circle-says-svb-deposit-is-available.html
4. IDRX. Mint IDRX. IDRX Documentation. https://docs.idrx.co/services/mint-idrx
5. IDRX. Redeem IDR. IDRX Documentation. https://docs.idrx.co/services/redeem-idr
6. IDRX. Supported Chain and Contract Address. IDRX Documentation. https://docs.idrx.co/introduction/supported-chain-and-contract-address
7. IDRX. Transparency and Audit Documents. https://idrx.co/en/docs/
8. CertiK. Security Assessment IDRX. https://idrx.co/docs/security-assesment-idrx.pdf

Disclaimer

This article is educational content and not an invitation to invest or transact. Crypto assets, including stablecoins, carry risk. Do your own research (DYOR) before making any decision.

Keep learning

The next article in this series is IDRX: How It Works and How to Access It. If you are just getting started, read What Is a Stablecoin? first, followed by Types of Stablecoins, How a Rupiah Stablecoin Works, and Stablecoin Risks and How to Assess Them. Full IDRX documentation is at docs.idrx.co, and you can follow @idrx.co for the latest academy content.