  Stablecoins have gained significant popularity recently, with their market
cap rising to over $180 billion. However, recent events have raised concerns
about their stability. In this paper, we classify stablecoins into four types
based on the source and management of collateral and investigate the stability
of each type under different conditions. We highlight each type's potential
instabilities and underlying tradeoffs using agent-based simulations. The
results emphasize the importance of carefully evaluating the origin of a
stablecoin's collateral and its collateral management mechanism to ensure
stability and minimize risks. Enhanced understanding of stablecoins should be
informative to regulators, policymakers, and investors alike.
