There were reports on the richest personalities in crypto, who suffered a major loss of about $ 60 billion in the last week and many have also lost half of their fortune. Cryptocurrencies are better known for the volatility; they can go up and down in double digits. But one form of cryptocurrency, called stablecoins, aims to provide refuge to those who want to exit constant volatility while still staying in the crypto market, as per CoinDesk. All crypto transactions depend upon the designed algorithm, a piece of code on the blockchain. Stablecoins are cryptocurrencies that are supposed to be pegged to fiat currencies like the US dollar. In the cases of USD-pegged stablecoins, their prices are supposed to be $1 at all times. The two biggest ones, tether (USDT) and Circle's usd coin (USDC), are “over-collateralized” by fiat reserves, meaning they have cash or cash-equivalent assets in their reserves. So, each UST or USDC traded in the crypto market is backed by what’s actually in the possession of the stablecoin issuers. They’re called algorithmic because what backs them is an on-chain algorithm that facilitates a change in supply and demand between them (the stablecoin) and another cryptocurrency that props them up. Algorithmic stablecoins are typically undercollateralized – they don’t have independent assets in reserves to back the value of their stablecoins. In fact, “undercollateralized stablecoins” and “algorithmic stablecoins” are often used interchangeably.

The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party. Blockchains have been heralded as being a disruptive force to the finance sector, and especially with the functions of payments and banking. However, banks and decentralized blockchains are vastly different. Algorithmic stablecoins typically rely on two tokens – one stablecoin and another cryptocurrency that backs the stablecoins – .