Types of Stablecoins

What you'll learn

• Four Approaches to Stability
• Fiat-Backed Stablecoins
• Crypto-Backed Stablecoins
• Synthetic / Delta-Neutral Stablecoins
• Algorithmic Stablecoins and the UST Collapse
• Comparing the Four Types
• For Deeper Reading

Key terms

Fiat-backed stablecoin

A stablecoin backed 1:1 by cash and short-duration Treasuries held in reserve. Examples: USDT, USDC, FDUSD, PYUSD.

Over-collateralization

Locking more crypto as collateral than the value of stablecoins minted. USDS typically requires 150%+ collateralization.

Sky Protocol

The August 2024 rebrand of MakerDAO. Issues USDS (1:1 with DAI) and the SKY governance token (1 MKR = 24,000 SKY). Migration finalized April 7, 2026.

GHO

Aave’s native crypto-backed stablecoin, launched July 15, 2023. Around $500M+ supply by early 2026 across Ethereum, Arbitrum, Base, and Avalanche.

crvUSD

Curve’s stablecoin, deployed May 17, 2023, using LLAMMA for continuous soft liquidations rather than hard liquidation thresholds.

LLAMMA

Lending-Liquidating Automated Market Maker Algorithm. Curve’s mechanism that gradually converts collateral as prices fall, smoothing out liquidations.

Delta-neutral stablecoin

A stablecoin (like Ethena’s USDe) that holds equal long and short positions in the same asset, so the dollar value of collateral stays constant regardless of price moves.

USDe

Ethena’s synthetic delta-neutral dollar, launched February 2024. Peaked near $14.6B late 2025 — the fastest stablecoin to $10B in history (~500 days).

Funding rate

The periodic payment between long and short positions in perpetual futures, typically positive in bull markets. Funding rate income is a major part of USDe’s yield.

Death spiral

A self-reinforcing collapse: peg breaks, absorber token sells off, peg gets harder to defend, more selling, and so on. UST/LUNA went from $40B+ to near zero in days in May 2022.

Do Kwon

Co-founder of Terraform Labs, the company behind UST/LUNA. Arrested in Montenegro March 2023, extradited to the U.S. December 31, 2024, sentenced to 15 years in prison.

PYUSD

PayPal USD, launched August 7, 2023 on Ethereum, expanded to Solana May 2024. By early 2026 the Solana version ($377M) has surpassed the Ethereum version ($356M).