Stablecoins are often overlooked in conversations about Bitcoin due to the perception that Bitcoin’s blockchain lacks the programmability needed to support them. However, this view is evolving rapidly. The Bitcoin ecosystem now hosts a growing number of stablecoins—digital assets pegged to stable values like the US dollar—operating across layer-2 solutions and even directly on the base chain via innovative protocols. For professional investors seeking exposure to stable, dollar-pegged assets within the most secure blockchain environment, Bitcoin-based stablecoins present a compelling opportunity.
This guide explores what Bitcoin stablecoins are, how they function, and the leading options available today—all while highlighting their unique advantages over stablecoins on other networks.
What Are Stablecoins?
Stablecoins are digital currencies designed to maintain a stable value by being pegged to external assets such as fiat currencies (like the US dollar) or commodities (like gold).
For example, a USD-pegged stablecoin typically trades at $1.00, assuming market conditions are normal. These tokens act as digital representations of traditional money, enabling seamless transactions on blockchains without the price swings associated with cryptocurrencies like Bitcoin or Ethereum.
The primary benefit of stablecoins is volatility mitigation. During periods of extreme market turbulence, investors can convert volatile holdings into stablecoins to preserve value. At the same time, they retain full access to decentralized finance (DeFi) ecosystems, where these tokens are widely used for lending, borrowing, trading, and yield generation.
While all stablecoins aim for price stability, their mechanisms vary significantly:
- Fiat-collateralized: Backed 1:1 by reserves held in bank accounts (e.g., traditional USDT or USDC).
- Crypto-collateralized: Overcollateralized using other digital assets via smart contracts.
- Algorithmic: Use code-based mechanisms to adjust supply and maintain pegs (less common today due to past failures).
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What Are Bitcoin-Based Stablecoins?
Bitcoin-based stablecoins are USD- or fiat-pegged digital assets that operate within the Bitcoin ecosystem, either through layer-2 networks or native protocols like Ordinals.
Due to Bitcoin’s limited smart contract capabilities, most Bitcoin stablecoins run on secondary frameworks built atop the main chain. These include:
- Stacks – Enables smart contracts and DeFi on Bitcoin.
- Rootstock (RSK) – A sidechain offering Ethereum-compatible execution.
- Liquid Network – A federated sidechain focused on fast settlement and confidential transactions.
Despite running off the main chain, these solutions inherit Bitcoin’s unmatched security through periodic anchoring or two-way pegs.
Additionally, the emergence of Ordinal Theory has enabled direct issuance of tokens on Bitcoin itself. By assigning unique identifiers to individual satoshis (the smallest unit of Bitcoin), users can inscribe data—such as token metadata—onto the blockchain. This innovation paved the way for BRC-20 tokens, including native Bitcoin stablecoins like Stably USD.
Thus, Bitcoin stablecoins combine the decentralization and security of Bitcoin with the price stability and utility of fiat-backed digital assets.
Leading Bitcoin-Based Stablecoins
Here are some of the most prominent stablecoins currently operating within the Bitcoin ecosystem:
DoC (Dollar on Chain)
Launched in 2019, DoC is an RSK-based stablecoin pegged 1:1 to the US dollar and collateralized entirely by Bitcoin. Unlike centralized fiat-backed stablecoins, DoC eliminates reliance on banks or custodians by locking BTC in a transparent smart contract.
This design protects users from counterparty risk while allowing Bitcoin holders to hedge against BTC price swings. DoC is part of the Money on Chain protocol, which supports decentralized lending and savings products.
L-USDt (Liquid Tether)
L-USDt is Tether’s version issued on the Liquid Network. It maintains a 1:1 peg to the US dollar and is backed by a reserve portfolio that includes cash, corporate bonds, precious metals, and even Bitcoin.
What sets L-USDt apart is its integration with Liquid’s privacy features and faster transaction finality. Investors gain access to a globally tradable stablecoin with enhanced confidentiality—ideal for institutional use cases.
BRZ Token
Pegged to the Brazilian real, BRZ operates on the RSK network and allows local users to enter crypto markets without exposure to exchange rate volatility. Users mint BRZ by depositing reais into a smart contract; redemption burns the tokens.
BRZ exemplifies how Bitcoin-based stablecoins can serve regional economies with transparent, blockchain-backed digital currency solutions.
Stably USD (#USD)
Introduced in May 2023, Stably USD is a BRC-20 token inscribed directly onto the Bitcoin blockchain using the Ordinals protocol. As one of the first native BTC-layer stablecoins, it represents a major milestone in expanding Bitcoin’s functionality.
Each #USD token is backed by USD held in custody by a U.S.-regulated financial institution. Its goal is to fuel DeFi innovation directly on Bitcoin by providing a reliable, decentralized medium of exchange.
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USDA
Built on Stacks, USDA is an algorithmic stablecoin soft-pegged to the dollar and generated when users lock STX tokens as collateral in Arkadiko’s vaults. Launched in 2021, USDA enables overcollateralized borrowing within a decentralized credit system.
Since Stacks is secured by Bitcoin through proof-of-transfer consensus, USDA indirectly benefits from Bitcoin’s robust network security—making it one of the most trust-minimized stablecoin options available.
Why Bitcoin Stablecoins May Be Superior
Bitcoin remains the most decentralized and secure public blockchain, with over a decade of proven resilience against attacks and outages. Stablecoins built on or anchored to Bitcoin inherit this foundational strength.
Consider these advantages:
- Enhanced Security: Layer-2 solutions like Stacks and RSK derive security from Bitcoin’s hash rate.
- Reduced Counterparty Risk: Crypto-collateralized models (e.g., DoC, USDA) avoid reliance on banks or centralized custodians.
- Censorship Resistance: Transactions occur peer-to-peer without intermediaries.
- Native Settlement Finality: With BRC-20 tokens like Stably USD, settlements happen directly on Bitcoin—no bridges or third-party chains required.
While the total market cap of Bitcoin-based stablecoins is still small compared to Ethereum-based ones (like USDT or DAI), adoption is accelerating thanks to innovations in layer-2 scaling and ordinals-based tokenization.
As more developers build DeFi applications on Bitcoin-compatible platforms, demand for trusted, stable value layers will grow—positioning Bitcoin stablecoins as critical infrastructure for the future of open finance.
Frequently Asked Questions
Is Bitcoin a stablecoin?
No. Bitcoin is not a stablecoin. It has no peg to any external asset and derives its value from scarcity, network adoption, and market demand. In contrast, stablecoins are specifically designed to minimize price fluctuations by being tied to stable assets like fiat currencies.
What’s the difference between stablecoins and Bitcoin?
The key differences are:
- Volatility: Bitcoin is highly volatile; stablecoins aim for price stability.
- Backing Mechanism: Stablecoins are backed by reserves or collateral; Bitcoin is backed only by decentralized consensus.
- Supply Model: Bitcoin has a capped supply of 21 million; stablecoins are minted or burned based on demand.
What is the most popular use of stablecoins?
The primary use is value preservation during market volatility. Investors convert crypto holdings into stablecoins to avoid losses during downturns. They’re also widely used in DeFi for lending, borrowing, and yield farming due to their predictable value.
Can stablecoins really be issued on Bitcoin?
Yes. While Bitcoin doesn’t natively support smart contracts, layer-2 networks (like Stacks and RSK) enable complex financial applications. Additionally, the Ordinals protocol allows data inscription on satoshis—making it possible to create BRC-20 tokens like Stably USD directly on-chain.
Are Bitcoin-based stablecoins safe?
Security depends on design:
- Crypto-collateralized coins (DoC, USDA) reduce counterparty risk.
- Fiat-backed versions (L-USDt) depend on custodial trust but offer liquidity.
Overall, their integration with Bitcoin’s network enhances resilience against hacks and failures.
Will Bitcoin become a major platform for stablecoins?
Growing developer activity suggests yes. With layer-2 scalability improving and ordinals enabling new token standards, Bitcoin is evolving beyond just digital gold into a platform for secure, decentralized finance—including stable value assets.
👉 See how leading platforms are integrating Bitcoin-native assets for institutional investors.