How Do Asset-Backed Tokens Differ from Algorithmic Stablecoins?

Asset-backed tokens (like gold-backed or fiat-backed stablecoins) derive their value from a verifiable, external asset held in reserve. Their stability is maintained by the reserves.

Algorithmic stablecoins, conversely, maintain their peg through a set of smart contract-based rules that dynamically adjust supply (minting/burning) in response to price fluctuations, without relying on external collateral.