These are stablecoins in which the network they run on has an algorithm that is constantly adapting supply to demand. It has the ability to burn or create more of that cryptocurrency in response to the demand of users, thus keeping the price stable. One of the more popular examples is the stablecoin DAI, issued by MakerDAO. 

Description of Algorithm-Based Stablecoins

These stablecoins are linked to things like fiat currencies, commodity, or even other cryptocurrencies. The most common is the US dollar and they maintain a price similarity via collateralization or through algorithmic mechanisms, buying and selling the asset.

Description of Asset-Linked Stablecoins

- Asset-linked stablecoins
- Algorithm-based stablecoins

University of Minnesota - Twin Cities

Stablecoins are a digital currency linked to a fiat currency, usually the US dollar. Due to this stable linkage they don't hold with them the massive amounts of volatility that is so common among other cryptocurrencies.

Stablecoins

Stablecoins: risks, potential and regulation

Types of Stablecoins

Stablecoins could simplify and speed up most exchanges in the digital economy. Smart contracts could be created to execute transactions, only when things like house inspections have taken place. Money to or from governments could be programmed to only be spent on certain goods. They could also be used in e-commerce as they provide the luxury of a payment system where the transfer of ownership and the security happen simultaneously.

Major Benefits of Stablecoins

Facebook's plan is to create the stablecoin Libra. A combination of a private stablecoin and a global electronic payment framework which perhaps its most intriguing quality being it is backed by multiple other stablecoins.

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