Stablecoins are cryptocurrencies designed to maintain a stable value relative to a reference asset, such as the US dollar.
There are three main categories of stablecoins: fiat-backed, crypto-backed, and algorithmic. Fiat-backed stablecoins are collateralized by cash and equivalents, while crypto-backed stablecoins are backed by other cryptocurrencies. Algorithmic stablecoins use protocol mechanisms without direct collateral.
The safety of stablecoins depends on the specific stablecoin's structure, issuer integrity, reserve quality, and smart contract security. Different stablecoins have different risk profiles.