Dustin
Member
Stablecoins are a type of cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency like the US dollar or other assets such as gold. There are three primary types of stablecoins: fiat-collateralized, crypto-collateralized, and algorithmic. Fiat-collateralized stablecoins (e.g., USDC, USDT) are backed by reserves of traditional currency, held in a bank account to support their value on a 1:1 basis. Crypto-collateralized stablecoins (e.g., DAI) use other cryptocurrencies as collateral, locking up a higher value of assets to account for volatility. Lastly, algorithmic stablecoins (e.g., UST) utilize smart contracts and algorithms to adjust supply and demand, often through minting and burning mechanisms, to maintain price stability without direct backing. Each type employs unique methods to keep its peg, offering different trade-offs in terms of stability, transparency, and decentralization.