What are the types of stablecoins?

Ritu13

There are several types of stablecoins, with the more common ones being: Fiat-backed Stablecoin, Crypto-backed Stablecoin, Commodity Stablecoin, and Algorithmic Stablecoin.

**Fiat-backed Stablecoin:**
   - This is the most common and popular type of stablecoin, pegged 1:1 to a fiat currency.
   - Each stablecoin is backed by a real fiat currency held in reserve in a bank. It means that for every stablecoin in circulation, there is an equivalent amount of fiat currency held in reserve.
   - For example, if an investor buys 1 stablecoin with 1 fiat currency, the issuing entity will keep 1 fiat currency as a reserve in a bank account.
   - When an investor wants to redeem 1 fiat currency, the issuing entity will exchange it for the stablecoin, then retire and destroy that stablecoin.

   Representative examples of fiat-backed stablecoins include USDT (Tether) and USDC (USD Coin), both pegged 1:1 to the US dollar. These tokens occupy a significant portion of the stablecoin market, but controversies around insufficient cash reserves have persisted. Recent developments include BUSD (Binance USD), which also pegs to the US dollar, with transparent financials and reserves.

   Other fiat-backed stablecoins include XSGD (Singapore Dollar) and EURS (Euro) by Stasis, anchored 1:1 to their respective fiat currencies.

It's essential for companies issuing fiat-backed stablecoins to ensure a 1:1 peg to the fiat currency and maintain sufficient reserves. In principle, the value of fiat-backed stablecoins should remain relatively stable as long as these conditions are met.

Yamini003

There are also quite a few stablecoins.

977Iti

It's worth paying attention to these stablecoins.

Kahn332

Knowing the currency you're using is sufficient.

Jafar224

It's advisable to keep an eye on stablecoins.

Jayne94133

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