What Is a Stablecoin and How Is It Related to Collateralization?

A stablecoin is a cryptocurrency designed to maintain a stable value, usually pegged to a fiat currency like the US Dollar. Collateralization is the method used to achieve this stability.

Fiat-backed stablecoins are collateralized by real-world assets; crypto-backed stablecoins are over-collateralized by other cryptocurrencies; and algorithmic stablecoins use code and incentives instead of direct collateral.