Stablecoin
In short: A stablecoin is a cryptocurrency pegged to a stable asset, most often a national currency such as the US dollar, so that one token aims to stay worth one…
A stablecoin is a cryptocurrency pegged to a stable asset, most often a national currency such as the US dollar, so that one token aims to stay worth one unit of that asset. Some stablecoins track other references, such as the euro or gold.
Why it matters
Stablecoins give crypto users a steady unit of value without leaving the blockchain, so traders use them to step out of volatile assets and exchanges use them as the quote currency in many trading pairs. How well the peg holds depends on the design: fiat-backed coins such as USDT and USDC rely on reserves held by their issuer, while crypto-collateralized designs are backed by other cryptocurrencies locked in smart contracts. Algorithmic stablecoins try to hold the peg mainly through supply rules, and several have failed. Any stablecoin can lose its peg, briefly or for good.
Example
A trader holds a volatile coin and wants to reduce risk without moving money back to a bank. They sell the coin for a dollar-pegged stablecoin on an exchange, and the value of their position now follows the dollar rather than the crypto market. Later they can buy back in with the stablecoin, or withdraw it to a wallet on a network the exchange supports.