What is a crypto backed stablecoin?

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.

How stablecoins work?

Here are some things to know about how stablecoins work. Definition: What are stablecoins? Stablecoins are a type of Bitcoin alternative (altcoin) that is built to offer more stability than other cryptos.

How many types of stablecoins are there?

There are three types of stablecoins, based on the mechanism used to stabilize their value. Fiat-collateralized stablecoins maintain a reserve of a fiat currency (or currencies) such as the U.S. dollar, as collateral assuring the stablecoin's value.

Are algorithmic Stablecoins backed by any asset?

Algorithmic stablecoins aren't backed by any asset — perhaps making them the stablecoin that is hardest to understand. These stablecoins use a computer algorithm to keep the coin’s value from fluctuating too much.