Not all stablecoins are created equal.
There are 4 approaches, each with their own risks and tradeoffs.
Let’s break down what makes each one different and why it matters for you 🧵
Fiat-backed stablecoins 🏦
Pegged to the price of fiat currencies like the US dollar, this category has seen the broadest adoption, with key issuers including @Tether_to, @USDC, and @PayPal.
Crypto-backed stablecoins ⛓️
These stablecoins use other crypto as collateral and through smart contracts.
This category is led by @SkyEcosystem and @LiquityProtocol.
Commodity-backed stablecoins 🪙
This category contains stablecoins which peg their value to real world assets like gold, offering tokenized alternatives to popular commodities.
PAXG from @Paxos is the most popular one.
Algorithmic stablecoins ⚖️
Companies like @fraxfinance have issued algorithmic stablecoins which attempt to automatically manage their peg through smart contracts and algorithms.
Go deeper with our beginner's guide to everything stablecoins ↓
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