What are the different types of stablecoins?
You’re probably familiar with the most popular “crypto dollar,” Tether, or USDT, but there are tons of other stablecoins besides Tether. They are categorized into four types:
▪️ Secured by fiat and securities
This type of stablecoin is backed by real currencies—e.g., the United States dollar at a 1:1 ratio. A clear example is USDT and, say, USDC. These coins are backed by real money and securities.
▪️ Backed by commodities
These coins use commodities, such as gold, real estate, and metals, to support their price
An example is Paxos Gold (PAXG) or Tether Gold (xAUT); their price is pegged to gold, and you can trade gold directly on the blockchain (keeping in mind the risks, of course).
▪️ Cryptocurrency-backed
As the name suggests, these stablecoins use other cryptocurrencies as collateral.
For example, the DAI stablecoin is not backed by fiat at all and relies on other cryptocurrencies as collateral.
▪️ Algorithmic stablecoins
The stability of stablecoins USDD, FRAX, and USDX is controlled by programs, algorithms that control the supply and circulation of tokens on the market.
So, there are many other stable coins besides USDT. But, of course, Tether remains the most popular solution on the market.
