Stablecoins are cryptocurrencies whose value is usually pegged to a specific asset or basket of assets, aiming to maintain price stability and reduce the risk of price fluctuations for traditional cryptocurrencies like Bitcoin and Ethereum. Here's a breakdown:

Anchor Asset Types:

Fiat collateralized: Backed by real fiat currency as a reserve, usually US dollars, held in a bank or other custodian. For example, 1 USDT is usually backed by a $1 reserve, and the issuer promises that users can exchange stablecoins for the corresponding fiat currency at any time.

Crypto asset collateralization: Collateralized by other cryptocurrencies, generally over-collateralized to cope with price fluctuations. For example, in DAI, users need to deposit cryptocurrencies such as Ethereum into smart contracts as collateral, and the collateral value is usually much higher than the value of the lent DAI.

Algorithmic: Maintains price stability by automatically adjusting the supply of tokens through algorithms and smart contracts, without the need for physical asset backing. This type of risk is relatively high.

Commodity collateral type: Linked to gold or other commodities, it is relatively rare, and its value is linked to the price of the corresponding commodity.

Peculiarity:

Price stability: This is a core feature of stablecoins, where their price fluctuations synchronize with the asset they are anchored to, with minimal fluctuations in most cases, serving as a value measurement tool.

High liquidity: Stablecoins are widely used in cryptocurrency exchanges for quick transactions and exchanges, serving as intermediaries in different crypto asset transactions.

Function:

Payment tools: can be used as a denomination unit of cryptocurrency exchanges, supporting cross-border transfers, on-chain payments, etc. Compared with traditional cross-border payments, stablecoin transaction fees are low, settlement speed is fast, and can also provide payment paths for customers who cannot enjoy banking services.

Store of Value: During crypto market fluctuations, investors can exchange other cryptocurrencies for stablecoins, realizing safe-haven needs and preserving the value of funds.

DeFi Basic Tools: They are important liquidity tools in the decentralized finance (DeFi) ecosystem, widely used in lending, mining, derivatives trading, and other scenarios for value transfer and pricing.