A stablecoin is a type of cryptocurrency that aims to peg its market value to an existing government-backed currency. To keep its value equivalent to $1, stablecoin will hold a bundle of assets in reserve, which will generally be short-term securities like cash, government debt and commercial paper.
The issue with stablecoins is the that many of them are backed by types of short-term debt that are prone to illiquidity, especially during times of economic crisis. Despite this shortcoming, stablecoin market has grown exponentially, valuing more than 120 billion USD. The bulk of this growth was witnessed in just the past 12 months.