What Is a “Stablecoin,” and What Are the Three Main Types of Stablecoin Collateralization Mechanisms?

A stablecoin is a cryptocurrency designed to have a stable value, typically pegged to a fiat currency like the US Dollar. The three main collateralization mechanisms are: 1) Fiat-backed (e.g. holding USD reserves); 2) Crypto-backed (e.g. over-collateralized with volatile crypto assets); and 3) Algorithmic (e.g. using a smart contract to dynamically adjust supply without direct collateral).