I like Bitcoin for its ease of use and security. It makes "money" transfer fast and easy, however a lot of people are afraid to use it because of its volatility, Would it be possible to create a currency with a system that enforces a stable value?
A fixed value, relative to what? To a fiat currency? In which case, should it be US dollars, euros, yens, yuans...? Relative to a commodity such as oil or gasoline of some quality? Relative to gold, silver, platinum, diamonds? A basket of all the above? All of these have very variable values and both the reasons of their intrinsic volatility and the possible remedies for that are far above your capabilities.
Creating a crypto-coin with a "stable" value relative to whatever you want to track it to (for tracking it absolutely to yield a fixed value is impossible, unless you control the other stuff) depends not on the crypto-coin's algorithms per-se but in the market - you'd be forced to create an exchange of last resort and be willing to spend a lot of money fighting people who'd try to move the price way too up or too down on purpose to cash a quick buck after the distortion, or simply are trying to attack your coin to destroy it or harm you. You'd need very deep pockets, much technical expertise and a lot of luck.
You would need an institution that guarantees 1:1 the interchange. The reliability of that institution, in always being able to perform the exchange, would determine the trust and value-stability in the cryptocurrency.
The US Treasury could credibly create a coin that's 1:1 with the US Dollar. Or, hypothetically, another institution that was widely believed to be richer (in USD) and more stable than the US Treasury.
yes, one could lock one crypto coin to another making one perfectly stable and the other even more volatile. For example you could take CENTcoin, say you want it to have the purchasing power of a 1955 copper penny. then when it reaches that value it drives the price of the other coin up or down not itself. this would be a good way to bring attention and value to both coins.