What Is the Difference between a 'Fiat-Backed' and a 'Crypto-Backed' Stablecoin? ▴ Learn

What Is the Difference between a ‘Fiat-Backed’ and a ‘Crypto-Backed’ Stablecoin?

Fiat-backed stablecoins (like USDC or USDT) are backed by reserves of traditional fiat currency (e.g. USD) held in bank accounts, relying on the issuer's promise and audit.

Crypto-backed stablecoins (like DAI) are backed by a basket of volatile cryptocurrencies held in smart contracts, often in an over-collateralized manner. The former is centralized and trust-based; the latter is decentralized and trustless/algorithmic.

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