Stablecoins are designed to minimize price volatility by holding on to a specific value. There are generally three types:
Fiat-collateralized stablecoins e.g. Tether (USDT) and TrueUSD are pegged 1:1 to the US dollar and are backed by dollar deposits.
Crypto-collateralized stablecoins e.g DAI — although this stablecoin is also pegged to the US dollar, its reserves are held in ETH
Commodity-collateralized stablecoins e.g. Digix is a stablecoin backed by gold.
Non-collateralized (algorithmic) stablecoins