A stablecoin is a cryptocurrency designed to keep a steady value, typically pegged 1:1 to a fiat currency such as the US dollar. It maintains the peg using reserves held by an issuer or crypto collateral managed by smart contracts, while purely algorithmic designs are riskier. Stablecoins are used for payments, trading and DeFi settlement, but they carry risks including depegging, reserve and issuer risk, and smart contract failures.