Glossary
Stablecoin
A token designed to track the value of a reference asset — usually the US dollar — through fiat reserves, on-chain collateral, or algorithmic mechanisms.
Stablecoins are the dollars of crypto. Fiat-backed stables (USDC, USDT) are redeemable 1:1 against bank-held reserves; crypto-backed stables (DAI, LUSD) mint dollars against over-collateralized on-chain positions; algorithmic stables (FRAX in part, UST historically) rely on a mint-and-burn mechanism against a partner token.
They dominate on-chain settlement, DEX trading pairs, and DeFi collateral. The risk profile differs sharply by design: a fiat stable's risk is the issuer and its banks; a crypto stable's is the collateral and the oracle; an algorithmic stable's is the reflexivity of its mechanism.