Fiat-Collateralized Stablecoin

A fiat-collateralized stablecoin, also called a fiat-backed stablecoin, is a token that aims to hold a steady value, usually one unit of a currency such as the US dollar, by having an issuer keep matching reserves off-chain. Each token in circulation is meant to be covered by cash and short-term instruments held with banks or custodians, and approved parties can mint new tokens by depositing fiat or redeem tokens back into fiat. The model is simple, but it moves the risk off the blockchain and onto the issuer: holders depend on the quality of reserves, on the banks holding them, and on redemption still working under stress. Issuers can also freeze balances at a given address.