A cryptocurrency that aims to keep its market price steady is known as a stablecoin. Since these digital currencies have become more widely used, many stablecoin projects have emerged. Stablecoins are designed to be fairly immune to market volatility, thus they shouldn't undergo big price movements, though the specific processes vary from currency to coin. The value of many stablecoins is fixed by tying them to the value of another asset. There are stablecoins that are linked to the price of other cryptocurrencies or even physical commodities like silver or gold, while the majority of them are tied to the US dollar. These coins prevent the dramatic price swings brought on by the high levels of volatility, which are extremely typical in cryptocurrency markets, by being tied to real-world assets. Comparing collateralized and non-collateralized stablecoins, the former are required to hold the assets that their coin is backed by (such as the US dollar or gold). So, based on the value of their holdings, they issue new units. The majority of stablecoins are based on this paradigm. The three most notable examples are USD Coin (USDC), Paxos (PAX), and TrueUSD (TUSD), where each token is backed in a 1:1 ratio by funds kept in bank accounts. As a result, these businesses only produce new stablecoin units after receiving the equal amount in fiat money. Some stablecoins, also known as crypto-collateralized stablecoins, are pegged to other cryptocurrencies rather than to money or commodities. Through methods for stability and over-collateralization, the peg of these coins is kept in place. DAI, the stablecoin created in the Maker DAO environment, is a notable example. On the other hand, non-collateralized stablecoins use algorithms to limit the quantity of tokens in order to maintain the price fixed at a predetermined level. These coins aim to preserve a constant value by algorithmically increasing and decreasing their available supply in response to market activity. Why use a stablecoin? Stablecoins are designed to offer some of the benefits of both the fiat currency and cryptocurrency worlds. Stablecoins can be used as a stable currency that offers improved transparency and decentralization, although they are currently largely employed as a hedge against the extreme volatility of cryptocurrency markets. Additionally, they offer speedier transactions and reduced fees when compared to traditional fiat currencies, which makes them particularly beneficial for domestic and international transfers.