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

What are the most popular stablecoins?

The most popular stablecoins in the market are ones backed by fiat currency. USD coin (USDC), for instance, is fiat-backed and pegged to the U.S. dollar (USD) at a 1:1 ratio. Other stablecoins are linked to the euro, the British pound, the Japanese yen and the Chinese RMB.

What are commodity-backed stablecoins?

Commodity-backed stablecoins are backed by other kinds of interchangeable assets, such as precious metals. The most common commodity to be collateralized is gold, but there are also stablecoins backed by oil, real estate, and baskets of various precious metals.