Which stablecoins are Reserve-backed?

Major stablecoins such as Tether, USD Coin and Binance USD are reserve-backed: they say that they hold enough dollar-denominated assets to maintain an exchange rate of 1:1. The companies say that one of their stablecoins can always be exchanged for one dollar.

What are the different types of stablecoins?

There are two main types of stablecoin: those which are backed by reserves comprising assets, such as fiat currency, bonds, commercial paper, or even other crypto tokens, and those which are algorithmic, or "decentralised".

What are crypto-backed stablecoins?

The cryptocurrency exchange Coinbase offers a fiat-backed stablecoin called USD coin, which can be exchanged on a 1-to-1 ratio for one U.S. dollar. Crypto-backed stablecoins are backed by other crypto assets. Because the backing asset can be volatile, crypto-backed stablecoins are overcollateralized to ensure the stablecoin’s value.

What is a fiat backed stablecoin?

While fiat-backed cryptocurrencies are more stable than typical cryptocurrencies, they are centralized. This is so the 1:1 ratio with their collateral can be maintained. This means that central authorities control USD Coin, which requires users to put their faith in strangers when investing in fiat-backed stablecoins. 2. Crypto-Backed Stablecoins