A stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging its market value to an external reference, such as a fiat currency (like the US dollar), a commodity (like gold), or another financial instrument.

The primary goal of stablecoins is to reduce the price volatility typically seen in other cryptocurrencies, thus making stablecoins more suitable for everyday transactions and as a store of value.

There are different types of stablecoins, including:

Fiat-collateralized stablecoins: These are backed by a reserve of fiat currency, such as the US dollar. Examples include Tether (USDT) and USD Coin (USDC).

Commodity-collateralized stablecoins: These are backed by reserves of commodities like gold or silver. An example is Tether Gold (XAUt)

Crypto-collateralized stablecoins: These are backed by other cryptocurrencies and use smart contracts to manage the collateral. An example is DAI.

Algorithmic stablecoins: These use algorithms to control the supply of the stablecoin to maintain its peg.

Stablecoins aim to combine the benefits of cryptocurrencies (like fast transactions and low fees) with the stability of traditional currencies.