Sep 6, 2018Â â‹…Â 2 min read
Stablecoins are cryptoassets that attempt to reduce volatility by retaining a peg to something more stable such as the U.S. dollar. There are three main types of stablecoins:
Fiat-collateralized stablecoins which have a centralized company that retains dollars and issues tokens that represent IOUs. In theory these should remain the most stable as they are redeemable for dollars on a 1:1 basis. However, as the Tether scandal has shown that is not always the case.
Examples: Tether, Gemini dollar, Paxos, USD Coin, TrueUSD
Crypto-collateralized stablecoins which seek to maintain a peg to $1 USD but rather than being backed by them are backed with cryptoassets. Since the collateral is volatile, to maintain faith in the backing they are typically over collateralized meaning the value of the crypto is much higher than the stablecoins themselves.
Seignorage shares which act as decentralzied central banks algorithmically adjusting the supply to maintain the peg. As demand grows it will issue more stablecoins, and otherwise it will issue bond-like instruments to remove coins from circulation.
Examples: Basis,
An Overview of Stablecoins - Multicoin Capital
Stablecoins: A Holy Grail in Digital Currency - Nick Tomaino
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