A stablecoin is a cryptocurrency designed to maintain a stable value relative to a reference asset, typically the US dollar. Stablecoins provide a bridge between volatile crypto and stable fiat.
Types of stablecoins: Fiat-backed (USDT, USDC) backed by reserves, Crypto-backed (DAI) overcollateralized with crypto, Algorithmic (FRAX) use algorithms to maintain peg, and Commodity-backed (PAXG) backed by gold.
Major stablecoins: USDT (Tether) - largest by market cap, USDC - regulated US-based, DAI - decentralized, BUSD - Binance (discontinued), and FRAX - hybrid algorithmic.
Use cases include trading pairs on exchanges, DeFi collateral and yields, payments and remittances, and hedging during volatility.