Who gets to add the next block?

Proof of work uses miners spending energy to compete to add blocks. Proof of stake uses validators locking up coins. The details depend on the network; these labels alone do not tell you whether a coin is safe.

Ethereum (ETH) is a smart-contract platform. It moved from proof of work to proof of stake in September 2022, in an event called the Merge.

Source: Ethereum: the Merge

Proof of work and proof of stakeProof of work uses miners spending energy to compete to add blocks. Proof of stake uses validators locking up coins. These simplify network-specific rules.WHO CAN ADD A BLOCK?Proof of workProof of stakeMinersValidatorsspend energylock up coinsPropose blocksPropose blocks
Two ways of selecting block producers. Each network has further validation rules.

How can a stablecoin lose its peg?

A stablecoin is a token designed to track a reference such as the US dollar. Its issuer’s reserves and redemption terms matter. A target is an aim; it is not a guarantee that you can always redeem or trade at that value.

If redemption is interrupted or confidence in the reserves falls, the token’s traded price can depart from its target. Read what redemption actually permits and who is responsible for it.

A stablecoin target is not a guaranteeA token aims to track a reference such as one US dollar. Reserves and redemption terms matter. If confidence or redemption breaks down, its traded price can leave the target.Reference: 1 US dollarStablecoin aims to track itReserves + redemption termsPeg holdsPeg breaksMarket price can depart from target
A mechanism sketch, not a promise that a peg will hold.

What does a token contract do?

A token contract is software that defines rules for a token, such as recording balances and checking transfers. A user submits a request; the programmed rules determine whether balances change or the request is rejected.

The contract and the token are distinct from a working product. A token can exist even when the service its promoters describe does not.

Source: Ethereum: smart contracts

A token contract is software rulesA transfer request reaches a token contract. Programmed checks determine whether token balances update or the request is rejected. A name does not prove a working product.Request: transfer tokensContract checks its rulesUpdate balancesReject request
The checks depend on the contract’s code. This sketch does not describe every token.

What makes a token worth questioning?

Many tokens have no working product. New coins are a common vehicle for scams such as rug pulls and pump-and-dump schemes. Ask what actually works, who can change the rules, and which claims you can independently check.

A familiar name, technical label or busy price chart is not evidence of a working system. Keep the technology, the issuer’s promises and custody arrangements separate.