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Fiat-collateralized Stablecoins
The US dollar, euro, or Japanese Yen serve as the collateral for these stablecoins. The stablecoin's issuer retains an equivalent amount of fiat money in a bank account or another safe asset to maintain the stablecoin's worth.
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Cryptocurrency-Collateralized Stablecoins
Other cryptocurrencies, such as Bitcoin or Ethereum, back these stablecoins. For the purpose of maintaining the stablecoin's value, the stablecoin's issuer keeps a comparable amount of cryptocurrency in development on a smart contract or other secure platform.
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Commodity-Collateralized Stablecoins
Some stablecoins have a specific commodity, like gold or oil, as their backing.The issuer of the stablecoin holds the equivalent amount of the commodity in a safe storage facility or another secure platform to maintain the value of the stablecoin.
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Algorithmic Stablecoins
In order to maintain a stable value, these stablecoins utilize algorithms and smart contracts. The algorithm regulates the stablecoin's supply depending on demand to maintain a steady price over time.
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Hybrid Stablecoins
To create a stablecoin that is more diverse and complex, these stablecoins combine two or more types. By combining commodities and algorithms, a hybrid stablecoin may be backed by a combination of fiat and cryptocurrency.
Stablecoins are a relatively new and evolving area of the cryptocurrency industry, and new stablecoins may emerge as the market develops.
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