Core Insights - The volatility of cryptocurrency prices creates a demand for more stable digital currencies, akin to cash [1][2] - Stablecoins are designed to maintain a stable value, typically pegged to real-world assets like the US dollar, providing benefits such as fast global payments and reduced price volatility [2][7] Types of Stablecoins - **Fiat-backed stablecoins**: These are backed 1:1 by actual money held in reserves, with Tether's USDT and Circle's USDC being prominent examples [4] - **Crypto-backed stablecoins**: These utilize cryptocurrency as collateral, often requiring overcollateralization to mitigate volatility, with DAI from MakerDAO as a notable example [5] - **Algorithmic stablecoins**: These rely on algorithms and incentives to maintain their value peg, but can fail under extreme market conditions [6] Importance of Stablecoins - Stablecoins have become essential in the crypto ecosystem, driven by their real-world utility rather than speculation, enabling users to conduct cross-border transactions quickly and earn yields in decentralized finance markets [7][8] - They serve as a financial lifeline for individuals in regions experiencing rapid currency depreciation or inflation [8][9]