# Types of stablecoins

<table><thead><tr><th width="170.33333333333331">Stablecoin</th><th width="456">Description</th><th>Examples</th></tr></thead><tbody><tr><td><mark style="color:blue;"><strong>Fiat backed stablecoins</strong></mark></td><td>Centralized and with a scale factor of 1, meaning that for each $1 you deposit as collateral, you get $1 worth of the stablecoin. These stablecoins are backed by actual fiat currencies like the US Dollar, and require centralized trusted off-chain partners and mediators like banks. These stablecoins have single points of failure: censorship risk (the stablecoins may be seized) and regulatory risk, which means that the third party entity requires trust from the users.</td><td>USDT, USDC</td></tr><tr><td><mark style="color:blue;"><strong>Algorithmic stablecoins</strong></mark></td><td>Decentralized in nature and their stability is based on trust in the governance token. Algorithmic stablecoin usually use endogenous collateral, and are oftentimes undercollateralized.</td><td><p>FRAX</p><p></p><p>Failed: TerraUSD/ LUNA</p></td></tr><tr><td><p><mark style="color:blue;"><strong>(Over-)</strong></mark></p><p><mark style="color:blue;"><strong>Collateralized stablecoins</strong></mark> </p></td><td>Decentralized and use exogenous collateral, meaning that the collateral that backs the stablecoin has a primary use-case that is separate from the stablecoin project. The amount of collateral determines the level of safety the stablecoin poses.</td><td>DJED</td></tr></tbody></table>

<figure><img src="/files/bvfOEDrgPumYgAoiGdvX" alt=""><figcaption></figcaption></figure>

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