Two stablecoins can target the same dollar value while exposing you to very different risks.
A fiat-backed token relies on an issuer and reserves. A crypto-backed token relies on collateral whose market value can fall. Extra collateral provides a buffer, not a guarantee.
That distinction matters when choosing where to hold funds: a familiar price tells you little about what supports it.
Before choosing, check the backing, how reserves or collateral are verified, and the rules for redeeming the token. Compare those protections before comparing lending yields.
The catch: a price target is not a promise. Reserve problems or falling collateral values can undermine stability, and lending adds another layer of risk.
Source: Ethereum.org — https://ethereum.org/en/stablecoins/
#Stablecoins #DeFi #CryptoEducation #RiskManagement #Ethereum
A fiat-backed token relies on an issuer and reserves. A crypto-backed token relies on collateral whose market value can fall. Extra collateral provides a buffer, not a guarantee.
That distinction matters when choosing where to hold funds: a familiar price tells you little about what supports it.
Before choosing, check the backing, how reserves or collateral are verified, and the rules for redeeming the token. Compare those protections before comparing lending yields.
The catch: a price target is not a promise. Reserve problems or falling collateral values can undermine stability, and lending adds another layer of risk.
Source: Ethereum.org — https://ethereum.org/en/stablecoins/
#Stablecoins #DeFi #CryptoEducation #RiskManagement #Ethereum