Bitcoin and other cryptocurrencies’ price volatility is one of the largest entry barriers that cryptocurrencies face today. In contrast to fiat money, cryptocurrencies, do not have a central bank which could implement some monetary policy to maintain their buying power. This in turn is reflected as huge volatility in the price of cryptocurrencies. If users are not confident that the buying power of their money is going to stay relatively the same from one day to the next, they will never adopt a cryptocurrency as their main median of exchange and they would prefer a stable alternative. Furthermore, given this price volatility, it is very difficult for a credit and debt system to be built on cryptocurrencies, since every agreement which includes future payments must consider the risk that arises from the price volatility and charge a large premium against it. Although there is a large amount of research related to the technical issues of cryptocurrencies like transaction throughput, smart contract security and optimization concerns, there is very little research regarding the price stability of cryptocurrencies which is the largest barrier for mass adoption. In this dissertation we present the Dolar Market Token protocol (DMT), a cryptocurrency whose tokens can reliably maintain a stable exchange rate with any other asset, and at the same time operate in a fully decentralized manner. Specifically, we attempt to define 1 DMT as being equivalent to 1 USD and keep this exchange rate stable albeit the change in demand. In theory, DMT could even be independent from the dollar and its exchange rate to be based on a consumer-based index or a basket of goods in the same way that the central banks calculate inflation in order to decide on what policy to follow. DMT accomplishes its price stability by adjusting its total circulating supply based on its algorithm specifications. This way it implements some form of monetary policy similar to those implemented by the central banks around the world. At the same time, it operates as a decentralized algorithm which is fully transparent and based only on its protocol specification, independent of any external human intervention. Because of this, DMT can also be perceived as a decentralized central bank.