Stablecoin

A token designed to maintain a fixed value, typically pegged to the US dollar.

A stablecoin is a token engineered to hold a fixed value — almost always $1 USD. Three architectures dominate: fiat-collateralized (USDC, USDT — backed by dollars in a bank account), crypto-collateralized (DAI — backed by overcollateralized ETH or other crypto), and algorithmic (UST, the now-collapsed Terra dollar — backed only by market incentives).

Fiat-backed stablecoins face counterparty risk from the issuer and the banks. Crypto-backed stablecoins face collateral liquidation risk in market crashes. Algorithmic stablecoins have failed catastrophically every time at scale. Stablecoins are not equivalent to dollars; they're claims on dollars with varying credit quality.