Author｜Sangbi District Shi Editorial Team
Release｜2026/11/09
Update｜2026/11/10

Stablecoins can be divided into four common designs based on the main linking mechanism: fiat currency reserve type, crypto-asset over-collateralization type, derivatives hedging type, and algorithm type. USDT and USDC rely on reserve and redemption channels managed by issuers. GHO can be lent through on-chain mortgages. USDe uses derivatives to hedge part of its spot positions. Historically, TerraUSD mainly relied on the minting and destruction mechanism of LUNA to maintain its link.

Further reading:What is a stablecoin? 2026 Stablecoin complete introduction: USDT, USDC, types, uses and risks

Comparison of the peg mechanisms of 4 stable coins

What type of currency does it rely on to maintain its price? The main observation is that issuers of key fiat currency reserves USDT, USDC, and EURC hold reserve assets. Qualified customers mint or redeem assets according to the terms, custody methods, redemption qualifications and liquidity. Crypto-asset over-collateralized GHO on-chain mortgage lending, liquidation and supply management, which can be combined with stable Fixed module collateral price, liquidation threshold, oracle and smart contract derivative hedging type (synthetic USD) USDe holds the supporting assets, and uses derivatives short positions to hedge part of the spot exposure funding rate, hedging position, counterparty and custody algorithm type TerraUSD (UST, 2022 2018 crash case) Create arbitrage inducements based on token supply or exchange rules. Whether the market is willing to accept the exchanged tokens, and whether the rules can maintain operation under selling pressure.

The same stablecoin can use multiple designs at the same time. For example, an on-chain mortgage type may also provide modules that are interchangeable with other stablecoins. "Dollars" or "Euros" describe what the price is tracking. USDC and EURC track different currencies, but both are reserve-based.

Fiat reserve stablecoins: USDT, USDC and EURC

This type of stablecoin has a reserve managed by the issuer. Taking the U.S. dollar stablecoin as an example, qualified customers can return the tokens in exchange for U.S. dollars according to the terms. When the market price deviates from $1, qualified participants who are able to mint or redeem may narrow the price difference through arbitrage.

The USDC reserves disclosed by Circle include bank cash, as well as assets such as short-term U.S. Treasury bonds held by the Circle Reserve Fund. Tether's USDT also adopts a reserve mode, and the report will list various reserve assets. Both are pegged to the U.S. dollar, and reserve details, disclosure frequency and redemption conditions can be checked separately. If you see "fiat currency reserve type", you can further read the asset details to confirm the proportion of cash and other assets.

Further reading:What are stablecoin reserves and redemptions? What do you think of the 1:1 reserves of USDT and USDC?

Crypto-asset over-collateralized stablecoin: taking GHO as an example

In Aave's mortgage lending mechanism, users can deposit assets accepted by the protocol and lend out GHO according to the mortgage limit. For example, if a position backs $100 of debt with $150 worth of assets, the collateral value is greater than the debt, leaving a buffer against price declines. This set of numbers is used to explain the concept, and the actual borrowing limit and liquidation threshold depend on the protocol parameters.

If the value of the collateral drops, making the position eligible for liquidation, the liquidator can repay part or all of the debt and obtain the collateral in accordance with the rules. Liquidation deals with the risk of borrowing positions. GHO also has a Stability Module (GSM), which can be swapped with supported stablecoins based on governance settings to help the market price get closer to the pegged target.

Further reading:What is Aave? A complete analysis of AAVE coin usage, DeFi lending interest rates, health factors and liquidation mechanisms

Derivatives Hedging Stablecoins: Taking USDe as an Example

Ethena calls USDe a synthetic dollar. For supported assets with large price fluctuations such as spot crypto assets, Ethena will allocate corresponding short positions in derivatives. For example, if spot prices fall, profits from the short position can be expected to offset some of the spot losses. Ethena can also directly hold highly liquid stablecoins and short-term tokenized physical assets, and the actual allocation will be adjusted according to the strategy.

Ethena’s current official documentation also lists supported asset and strategy categories such as non-crypto asset basis trading, DeFi over-collateralized lending, and over-collateralized lending to institutional counterparties. New assets and strategies are subject to review by the Governance and Risk Committee, and exposure limits, qualifications and risk parameters are set; the actual allocation will change and should be subject to the official transparency dashboard. Therefore, when evaluating USDe, in addition to derivatives hedging, it is also necessary to review the lending agreement, borrowers, collateral and liquidation arrangements based on the current configuration. It cannot be assumed that all supported assets only use crypto asset spot and perpetual contract short positions.

The effect of hedging depends on whether the position can be maintained, adjusted and settled. Even with reduced spot price exposure, it is still important to monitor perpetual contract funding rates, derivatives counterparties, and custody arrangements. sUSDe is the token obtained after staking USDe, and the income will change according to the performance of the protocol strategy.

Further reading:The founder of Ethena said that the decoupling of USDe was due to an error in Binance’s oracle machine, and the market conspiracy theory: it was manipulated by coordinated attacks to plummet.

Algorithmic Stablecoin: Taking the Historical TerraUSD as an Example

TerraUSD (UST) originally allowed users to destroy 1 UST in exchange for new LUNA valued at US$1 according to the protocol. If the market price of UST drops to US$0.98, you can theoretically buy UST and then exchange it for LUNA according to the rules to try to earn the price difference. Whether arbitrage can work depends on whether the received LUNA can be traded in the market and whether the transaction price can cover the cost.

When a large number of holders exited in 2022, the exchange increased the newly issued LUNA, but the market was unable to absorb the selling pressure. As the price of LUNA drops, redeeming the same value of UST requires minting more LUNA. UST eventually lost its USD peg and LUNA price fell significantly. When analyzing tokens from other mining algorithms, it is still important to confirm what reserves, collateral, or redemption options it has.

Further reading:What is stablecoin decoupling? Depeg reasons, classic cases and judgment methods

When you see a new stablecoin, what should you check first?

  1. Check the subject of price tracking. Check first whether it is 1 USD, 1 EUR, or some other reference value.
  2. Check supported assets and storage methods. Look for the issuer's reserve report, the protocol's collateral information, or the strategy's asset and counterparty disclosures.
  3. Check the actual exit pipe. Confirm whether you can redeem it from the issuer, swap it through an agreement, or you can only sell it in the secondary market. Eligibility, limits and closing conditions may differ between pipelines.
  4. Rules for checking exceptions. When reserve funds can be used, when collateral positions will be liquidated, and whether derivatives positions can be transferred or liquidated, all will affect the performance of different types under stress.

Frequently Asked Questions about Stablecoin Types

Are USDT and USDC the same stablecoin?

Both are USD reserve stablecoins and are managed by different issuers. Reserve composition, disclosure method and redemption conditions must be viewed separately.

Will over-collateralized stablecoins decouple?

Can. Over-collateralization provides a buffer, but when collateral falls too fast, liquidation liquidity is insufficient, or market selling pressure is concentrated, the transaction price may still deviate from the pegged target.

Are USDe and TerraUSD (UST) the same thing?

Both target the U.S. dollar and have different main peg mechanisms. USDe uses backing assets and derivatives for hedging. Historically, UST relied on the minting and destruction of LUNA to absorb changes in supply and demand.

official sources

*This article was compiled by the Sangbi District Editorial Team based on official information and public information. The content is for information and educational purposes only and does not constitute investment advice.

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