Stablecoin Types Vol. 1 — Fiat-Backed.
02 Jan 2023, 18:38
💎Stablecoin Types Vol. 1 — Fiat-Backed💎
Stablecoins are basically cryptocurrencies that have their value pegged against stable assets. Generally speaking, stablecoin types depend on their collateral structure — that is, which asset is it that backs them. Roughly these can be split into 4 categories: Fiat-Backed, Crypto-Backed, Commodity-Backed & Algorithmic.
💰 Fiat-collateralized stablecoins are some of the most relaible and simple to understand. Backed by Fiat currency, such as USD, Euro or GBP, they rely on a country’s stable economy in order to mitigate the usual fluctuations that cryptocurrencies are prone to, and are issued with a 1:1 ratio. That is, one stablecoin is equal to one unit of Fiat currency.
Every fiat-backed stablecoin has real Fiat currency in a bank account backing it up. That way, whenever coin holders wants to cash out their tokens — an equal amount of collateral is taken from the reserve.
Stay tuned for our next post, exploring crypto-backed stablecoins!🚀