What are collateralized stablecoins?

Collateralized stablecoins can be described according to two broad categories: Off-chain collateralized stablecoins are backed by bank deposits or other cash-like assets traded in the traditional financial system. Because traditional assets are not represented by tokens on a blockchain, these stablecoins are referred to as "off-chain".

Do uncollateralized stablecoins hold assets?

Although some uncollateralized stablecoin protocols hold assets, as was the case for Terra USD for example, these assets 1) have significantly lower value than the market capitalization of the stablecoins themselves, and 2) are never part of a redemption process to which the issuer commits itself, as is the case for collateralized stablecoins.

Can a stablecoin be collateralized by other cryptocurrencies?

Stablecoins can also be collateralized by other cryptocurrencies. The biggest example in this category is the DAI (DAI) algorithmic stablecoin, which is pegged to the U.S. dollar but is backed by Ethereum and other cryptocurrencies. But due to the underlying collateral being in cryptocurrency, it is prone to more volatility.