Stablecoins play an important role in the digital asset world. One of the major designs of stablecoins is to minimize digital currency price volatility. In the past couple of years, the most popular cryptocurrency prices have been very volatile, for example, bitcoin and Ethereum. Huge price fluctuations prevent the wide adoption of cryptocurrency as money for daily transactions. That is where stablecoins are designed to address this issue.
As we learned in Chapter 4, Stablecoin, stablecoins connect cryptocurrency and fiat currencies with the total amount of backed assets (mostly, this is in USD, or in a digit currency such as bitcoin, ether, or gold). It stabilizes the price with the one-to-one equivalent in USD, euros, or cryptocurrency.
