A stablecoin is a cryptocurrency designed to hold a fixed value, usually one dollar. How it does that varies, and the differences have determined which ones survived.
Fiat-backed
The issuer holds dollars or short-term government debt and issues one token per dollar held. Redemption keeps the price at parity – if the token trades below a dollar, someone buys it and redeems for a dollar.
This works, and it depends entirely on the reserves being real, liquid and verifiable. Independent attestation is what separates a credible issuer from a claim.
Crypto-collateralised
Backed by other cryptocurrency, over-collateralised because that collateral is volatile. Deposit substantially more value than you mint, with automatic liquidation if the collateral falls.
More transparent, since the collateral is visible on-chain. Vulnerable to sharp market falls that trigger cascading liquidations.
Algorithmic
No meaningful collateral. The peg is maintained by a mechanism that expands and contracts supply, usually involving a second token.
These have failed repeatedly and catastrophically. The mechanism works while confidence holds and unwinds completely when it does not, because the value supporting the peg is itself dependent on the peg.
What to check
What backs it, who verifies that, and whether you can actually redeem. If the answer to any of those is unclear, the stability is an assertion.
The regulatory direction
Rules requiring reserves, disclosure and redemption rights are being introduced in several jurisdictions, which will squeeze out the weakest issuers.
The caveat
Explanation rather than advice.