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## stablecoins 101
<br>
#### fiat-collateralized stablecoins
<br>
* fiat-collateralized stablecoins are stablecoins that are backed by fiat currencies like the US dollar.
* Their reserves are held by a central entity. The most popular fiat-backed stablecoins at this time are USDC, USDT, and BUSD. 
* The main weakness of fiat-collateralized stablecoin is centralization as the collateral of a fiat-collateralized stablecoin is held by one independent party.
<br>
#### cryptocurrency-backed stablecoins
<br>
* This motivated the development of more decentralized, cryptocurrency-backed stablecoin.
* The main player in this category today is MakerDAO’s Dai stablecoin.
* While crypto-backed stablecoins are good for their decentralization, they are capital inefficient. '
<br>
#### decentralized (algorithmic) stablecoins
<br>
* The average consumer or institutional investor would rather mint 1:1 through a centralized fiat stablecoin than have to over-collateralize by at least 150% to issue a decentralized stablecoin.
* For this reason, developers set out to create non-collateralized (or algorithmic) stablecoins.
* These coins maintain their peg without having to directly collateralize the issuance.
* The two largest forces in the market in this category are Terra and Fei.
<br>