Stablecoin

Stablecoins fall into a few broad designs: fiat-collateralized (backed by cash and cash-equivalent reserves held off-chain), crypto-collateralized (backed by other crypto assets, usually over-collateralized to absorb volatility), and algorithmic (using supply adjustments rather than reserves to hold the peg).

For example, converting $1,000 into a US-dollar-pegged stablecoin should yield roughly 1,000 tokens, before any conversion fee — letting you hold dollar-equivalent value on-chain without cashing all the way out to a bank account.

A common mistake is assuming every stablecoin is equally safe simply because it's called 'stable.' A peg is only as reliable as the quality and transparency of whatever backs it, and several stablecoins have lost their peg in the past — checking what actually backs a given stablecoin matters.