#StablecoinSurge

Types of Stablecoins

1. Fiat-Collateralized Stablecoins

Backed by traditional fiat currency in a 1:1 ratio.

Examples:

USDC (USD Coin) – Backed by USD reserves.

USDT (Tether) – Pegged to USD, widely used in trading.

BUSD (Binance USD) – Regulated and backed by USD.

2. Crypto-Collateralized Stablecoins

Backed by other cryptocurrencies but over-collateralized to absorb market fluctuations.

Examples:

DAI (MakerDAO) – Backed by Ethereum and other crypto assets.

3. Algorithmic Stablecoins

Maintain their peg using smart contracts and algorithms without direct collateral.

Examples:

FRAX (Frax Finance) – Partially backed by collateral and algorithmic mechanisms.

UST (TerraUSD) – Previously failed but was algorithmically pegged to USD.

4. Commodity-Backed Stablecoins

Pegged to physical assets like gold or silver.

Examples:

PAXG (Paxos Gold) – Each token represents one fine troy ounce of gold.

Use Cases of Stablecoins

Trading and Hedging: Used as a stable store of value in volatile crypto markets.

Payments and Remittances: Enable fast and low-cost cross-border transactions.

DeFi (Decentralized Finance): Used in lending, staking, and yield farming.

Savings and Investment: Some stablecoins offer interest-bearing opportunities.