How do different types of stablecoins work? 🟡

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🇻🇦 Just in case, let us remind you that Stablecoins are cryptocurrencies with a stable price, which is not subject to volatility and remains unchanged.

There are three types of stablecoins in particular:

➡️ Secured by fiat currencies (fiat-collateralized)

In this approach, each steblycoin coin is tied to one unit of fiat currency - USDC, Tether (USDT), TrueUSD (TUSD), Binance USD (BUSD);

↪️ Secured by cryptocurrencies (crypto-collateralized)

Stablecoin creator creates a reserve in collateralized cryptocurrency, the estimated value of which exceeds the value of the stablecoin. Even if the market experiences a significant drop in the price of the cryptocurrency with which the stabelcoin is collateralized, the latter will retain its value due to overcollateralization - DAI;

➡️ Non-collateralized

They are based on such an economic process as senorage. In simple words: if the value of one stabelcoin exceeds $1, the supply increases (i.e. new coins are issued), and when the value is less than $1, the supply decreases (i.e. coins are "burned") - Basecoin, Carbon, Havven.

➡️Each type has its own set of advantages and disadvantages, but the largest capitalization is still with stablcoins backed by fiat currencies.