Fiat-backed stablecoins such as USDC and USDT hold reserves of cash and short-term Treasuries and promise redemption at one dollar. Their issuers are effectively narrow banks, and the quality and auditing of those reserves is the entire question.
They are the settlement layer of crypto. Most trading pairs are quoted against them, they move value between exchanges and chains in minutes, and in countries with capital controls or high inflation they function as informal dollar accounts.
The peg holds until it does not. USDC traded to 87 cents in March 2023 when part of its reserves sat at the failing Silicon Valley Bank, and the algorithmic TerraUSD collapsed to nothing in 2022. Backing model and reserve custody are the two things worth checking.