The concept of stablecoin sounds mysterious, but it is actually a digital asset with a relatively stable price. However, this does not mean it never experiences fluctuation; rather, the designers intentionally anchor it to a stable reference point - usually a fiat currency like the US dollar.

Many people easily confuse and think that stablecoins are a single thing. In reality, they are not at all. There are various issuance models in the market, and the underlying logic varies greatly.

**Fiat-backed - The Most Mainstream Choice**

Stablecoins like USAT and USDC belong to this category. They are issued by private companies, such as Tether and Circle. The workflow is straightforward: users or institutions deposit an equivalent amount of fiat, and the issuer creates the corresponding number of stablecoins on the blockchain. Want to redeem? Just reverse the operation.

One important thing to understand is that the USDT in your hands does not equal real US dollars. Strictly speaking, it is a claim certificate against the issuer's dollar — equivalent to a bond certificate. This is why the credit foundation of such stablecoins is important; the issuer needs to have bank accounts, custodians, and regular audits.

**Cryptocurrency Collateralized - A Decentralized Experiment**

DAI is the most successful representation in this direction, managed by the MakerDAO DAO system. Its gameplay is completely different: users over-collateralize with volatile assets like ETH and BTC, and then the system mints DAI at a certain ratio. If the price of the collateral crashes, the smart contract will automatically trigger the liquidation mechanism.

Essentially, this is an algorithmic lending certificate. There is no centralized company; everything is driven by code and community governance. Sounds cool, but the risks are not small.

**Algorithmic Stablecoins - A Textbook Lesson from the Market**

UST was once thriving, but later it collapsed. This type of stablecoin does not rely on real collateral, but rather adjusts the supply-demand balance through algorithms created by programmers—by minting or burning. It sounds good in theory, but in reality, once it encounters systemic shocks, it is difficult to maintain the peg. The lesson from Terra is already very clear.

So, understanding stablecoins fundamentally involves grasping their issuance mechanisms and the underlying risk-bearing methods. Fiat collateral is relatively conservative but relies on centralized trust; crypto collateral is more decentralized but sensitive to market fluctuations; algorithmic stablecoins have basically been rejected by the market. The choice of which type to select depends on your trade-off between risk and the degree of decentralization.