Types of Stablecoins: Fiat, Crypto, Algorithmic & More
1. Fiat-Collateralized StablecoinsThese stablecoins are backed 1:1 by a reserve of fiat currency (US Dollar, Euro, etc.), & the value of the stablecoin is tied to the value of the fiat currency.
2. Crypto-Collateralized StablecoinsThese stablecoins are backed by a reserve of other cryptocurrencies (Ethereum, Bitcoin, etc.). Due to the volatile nature of cryptocurrencies, these stablecoins are often over-collateralized
3. Algorithmic StablecoinsThey are not backed by any collateral but instead rely on algorithms & smart contracts to control supply & demand of the stablecoin in order to maintain its value
4. Commodity-Collateralized StablecoinsThese are backed by real-world assets such as gold, oil, or other commodities. The value of the stablecoin is tied to the value of the underlying commodity
5. Hybrid StablecoinsHybrid stablecoins combine features of multiple types of stablecoins to provide a more stable and resilient mechanism.