Stablecoins are cryptocurrency assets with low volatility built into them and are useful as a trusted medium of exchange or store of value.
IOU stablecoins are based on a centralized model of authority. The centralized authority is relied upon to be trustworthy and centrally controls an asset and issues stablecoins that are redeemable for that asset.
Seigniorage Shares are a form of stablecoin that algorithmically expand and reduce the supply of coins issued on the network to maintain a stable currency price. This form of stablecoin is similar to how central banks maintain the stability of fiat currencies.
Stablecoins that use collateralization use on-chain trustless issuance where assets are pledged by users to be used as collateral on the blockchain. Stablecoins using collateralization are stabilized naturally through users using their knowledge over-collateralization, market efficiencies, complimentary incentives, profit motives, fallback procedures, and other market-based information to maintain price stability.
