Stablecoins can be defined as cryptocurrencies whose market value is attached to some external reference. This means that the value is tied to an outside asset like commodities such as Gold, Silver, or currencies like the U.S Dollar, Euro, etc. It is designed to imitate the value of fiat currency and to reduce the volatility of stablecoins.
There are four categories of stablecoins:
Commodity-collateralized stablecoins
Fiat-collateralized stablecoins
Non-collateralized stablecoins
Crypto-collateralized stablecoins