Stablecoin (or stable coin), as its name indicates, is a stable cryptocurrency. The key here is what is "stable", how to measure, stability in terms of what? We observe stablecoin in details. 

Reserve

Typically, stablecoin is backed by fiat money or a basket of fiat moneys. But it is not limited fiat money. It can be gold, bond, or other stable assets. In real world, we actually measure “stability” using “US dollar” or “price level”. So depending on different reserves, we can have different definition stablecoin. In terms of reserve, it has a few types:

(1) Fiat money reserved, a basket of fiat money reserved, or its derivatives like bonds. USDT is a popular full reserve US dollar stable coin issued by Tether. CNH is an offshore Chinese yuan backed stablecoin issued by Tether as well. This type of stablecoin is no double stable in terms of backed currency, but it could fluctuate drastically compared to US dollar as the backed fiat currency is not stable compared to US dollar.  

(2) US dollar measured reserve, typically us dollar, us bond, or US dollar-pegged currencies like Hong Kong dollar. This type of stablecoin is fiat money reserved stablecoin as well. But it is stable in real world. As it is

(3) Other assets reserved. Typically gold reserved currency and oil reserved currency. PAX Gold (PAXG) is a typical gold-backed stablecoin. Actually in history paper dollar is gold-backed, and paper dollar is simply a certificate of the gold ownership. "Petro" is a typical oil-backed cryptocurrency issued by Venezuela.

(4) Cryptocurrency reserved or a basket of cryptocurrencies.

(5) Mix of above types. Liba would-be-issued by Facebook is also a stablecoin backed by a reserve of real assets with low-volatility "such as bank deposits and short-term government securities in currencies from stable and reputable central banks"

Reserve Proportion

Typically stablecoin is fully reserved(100% reserved, 1-to-1 reserved). But this is not always the case. With no full reserved, it introduced “credit” and “trust”, and create “credit money”, increasing money supply. This is typically the function of commercial banks and central banks.

Regulation

There are regulated stablecoins and unregulated stablecoins. There are risks of unregulated stablecoins. Regulated stablecoin is typically regulating which bank to reserve money, limited operation on reserve money, keep assure it is full reserved without excessive issuing.

List of typical Regulated stablecoins:

(1) USD Coin(USDC) is the first fiat stablecoin implementation from CENTRE, and Circle and Coinbase are the first commercial issuers of USDC. USDC are held in reserve by regulated financial institutions.USDC is developed on Ethereum platform and is an ERC-20 token. USDC is based on CENTRE, open source framework and membership scheme.

(2) Gemini dollar(GUSD) is Issued by Gemini Trust Company, LLC, a regulated, audited New York trust company and Backed by US dollars held at State Street Bank and Trust Company.

(3) Paxos Standard (PAX) is backed 1:1 for the dollar and it’s issued by the Paxos Trust Company, so the funds are carefully protected, audited and regulated.

Issuer

Most stablecoins are issued by companies, including commercial banks with fiat money as the reserve. Pure fiat stablecoins are USDC, GUSD, JPM Coin,etc. Facebook's Libra and JP Morgan are also stablecoins.

But there is a special type of issuers, central banks, who have both the power of money issuance and also issue the stablecoin, which is called Central Bank Digital Currency(CBDC). With CBDC, central bank still hold the absolute power of money issuance while adopting the advantage of cryptocurrency and blockchain.

Why Stablecoin?

Stablecoin makes possible using fiat money( or other assets like gold) in cryptographic form, which inherits the benefits and drawbacks of blockchain like instantaneous money movement network, easier payment removing the whole "payment-settlement-clearance" circle that traditional financial institutions are suffering. Stablecoin offers "stable" in cryptocurrency where huge fluctuations are not uncommon at the same time enjoying the convenient conversion between stablecoin and other cryptocurrencies. Stablecoin is like a bridge between traditional financial world and cryptocurrency world. Currently most cryptocurrency exchanges offer stablecoin exchange services.

Challenges

(1) regulations. In the traditional financial world, there are strict and longy regulations and best practices like Key Your Customer(KYC), Anti Money Laundering (AML), risk managment, credit system, or even General Data Protection Regulation (GDPR), etc. 

(2) Vested Interest. As financial services based on stablecoin may reduce some roles of traditional financial institutions, stablecoin may encounter resistance. And in terms of services, stablecoin issuer may function as a bank. Central bank would extend its power to regulate "stablecoin issuer" as well.

List of Stablecoins