What is a stable cryptocurrency?

Stable cryptocurrencies are an attempt to establish some form of guarantee to the market. Because they are pegged to a real-world asset, they represent real money. Essentially, stablecoins were created to reduce price volatility and produce a reliable environment for cryptocurrency adoption.

Why are stablecoins useful to crypto?

Here's why stablecoins are useful to crypto: Cryptocurrencies such as bitcoin and ether offer a number of benefits, such as not requiring trust in an intermediary institution to send payments anywhere and to anyone. But one key drawback is that cryptocurrencies' prices are unpredictable and have a tendency to fluctuate, often wildly.

What are crypto-collateralized and algorithmic stablecoins?

Crypto-collateralized and algorithmic stablecoins could be the answer. A stablecoin is a cryptocurrency that is pegged to the value of a reserve asset, with the aim of mitigating price volatility.

Why are stable cryptocurrencies over-collateralized?

Stable cryptocurrencies that are backed by crypto are often over-collateralized. This means that the crypto that is in reserve for backing purposes greatly exceeds the value of the stablecoins issued. This is due to the extreme volatility of the market, which causes the reserve to be prone to volatility as well.