Asset-backed stablecoins are backed by reserves of the underlying asset, held in a custodial account, and are redeemable for the underlying asset at a fixed rate.
Algorithmically stabilized stablecoins, on the other hand, adjust their supply based on changes in demand, using smart-contract algorithms to maintain their value.
Stablecoins can be used as a store of value, medium of exchange, or unit of account, just like traditional currencies.
Stablecoins can be used to trade other cryptocurrencies that might be more volatile or challenging to obtain fiat currency directly.
Stablecoins can also be used to settle cross-border transactions without the need for intermediaries.