Stablecoins are cryptocurrencies designed to maintain a fixed value — typically $1. They're the bridge between traditional finance and DeFi, the primary currency on Polymarket, and a critical tool for traders who want to stay in crypto without exposure to price volatility.
Backed 1:1 by actual US dollars (or equivalents) held in bank accounts. For every USDC or USDT in circulation, the issuer holds $1 in reserves. Highly stable but trust-dependent — you're trusting the issuer actually holds the reserves.
DAI (by MakerDAO) is backed by crypto collateral (ETH, WBTC, etc.) at an overcollateralised ratio — meaning you must post >$1.50 of crypto to mint $1 of DAI. This protects the peg even if collateral falls in value. No centralised issuer; governed by DAO token holders.
Attempt to maintain a peg through algorithmic supply/demand mechanics without direct collateral backing. TerraUST was the most notable example — and its collapse in May 2022 wiped out $40 billion in value. Most algorithmic stablecoins are now considered extremely high risk.
| Feature | USDC (Circle) | USDT (Tether) |
|---|---|---|
| Issuer | Circle (US-based) | Tether Limited |
| Regulatory transparency | Monthly attestations by auditors | Historical opacity, improving |
| Reserve composition | Cash + short-term US Treasuries | Mix of cash, bonds, CP |
| Market cap rank | #2 stablecoin | #1 stablecoin |
| Used on Polymarket? | ✅ Yes — primary currency | Limited |
Polymarket chose USDC as its primary market currency because Circle (USDC's issuer) is US-regulated and provides monthly reserve attestations, making USDC the most trusted centralised stablecoin for institutional and retail traders. All Polymarket balances, bets, and winnings are denominated in USDC.