Cryptocurrency prices are known to be very volatile. Intraday swings more than 10% are common with cryptocurrencies. Stablecoins were created to ease this volatility, attached to other stable assets like the USD.
One of the earliest centralized stablecoins ever introduced was tether (USDT). Each USDT is allegedly supported by $1 in the bank account of the issuer. One main downside, however, is that it requires trust from users that the USD reserves really exist and are completely collateralized.
This issue of trust is what decentralized stablecoins look to solve. Created through a method of overcollateralization in a decentralized way, decentralized stablecoins work completely on decentralized ledgers, are run by decentralized independent organizations, and have reserves which anyone can publicly audit.
Though stablecoins themselves are not considered as financial applications, they offer a stable value store for everyone, therefore improving the accessibility of DeFi applications.
