How do stablecoins works?

Stablecoins mainly works in two ways,

Collateralization :

Fiat collateralization means that each coin is backed by something in most cases that is one US dollar. The most famous company Tether realized their USDT stablecoins using fiat collaboration. Fiat collateralization stablecoins are quite stable much more of an alternative.

Problems:

The money required to put off each USDT cannot be invested. This can be the millions of dollars of their company are not earning interest
Another problem is specifically the trader’s faces, it is very difficult to prove that you own the total matter of assets

Stablecoins Smart Contract

Smart contract stablecoins are usually much more volatile. They must manipulate the supply of coins to adjust the price. their main algorithm works in stablecoin.

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Source: cryptochain24.com

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