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Fiat-backed stablecoins are known as cryptocurrencies that are backed by reserves in a real-world currency, such as the U.S. dollar or the euro, and are tied to the value of that currency.
Fiat-backed, commodity-backed, cryptocurrency-backed, and algorithmic stablecoins are the four main types of stablecoins.
Stablecoins that are "fiat-backed," or having financial reserves in fiat money kept by a regulated organization like a regular bank, are the most widely used varieties. Fiat-backed stablecoins are, in contrast to their three other equivalents, actually backed by real-world currencies. Like any other cryptocurrency, these coins can be used to make online purchases of products and services.
A stablecoin's value is based on the price of the underlying item rather than on supply and demand like other cryptocurrencies. For example, 1 tether (USDT) should always be worth $1, albeit market conditions can make it fluctuate significantly in practice.
Extra reading:
https://101blockchains.com/fiat-backed-stablecoin/
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