What is a stablecoin and how does it differ from other cryptocurrencies?

A stablecoin is a cryptocurrency designed to maintain a consistent value, typically pegged to a real-world asset like the US dollar. For example, USDC and USDT aim to stay at $1.00. Unlike Bitcoin or Ethereum, whose prices fluctuate based on market demand, stablecoins minimize volatility through backing mechanisms. Some are backed by actual reserves held in banks, while others use algorithmic formulas or collateral. Stablecoins serve as a bridge between traditional finance and crypto, letting traders store value without experiencing price swings. They're essential for trading pairs on exchanges and settling DeFi loans, making them less speculative than other cryptocurrencies.