DeFi & Yield

What is the difference between a fiat-backed and an algorithmic stablecoin?

A fiat-backed stablecoin holds its value by keeping reserves of cash and equivalents, so each token is meant to be redeemable for real currency held by an issuer. An algorithmic stablecoin instead relies on code, supply adjustments, and market incentives to track its target, often with little or no hard reserve. For example, a fiat-backed coin points to dollars in custody, while an algorithmic one expands or contracts supply to defend the peg. The structural difference matters because reserve quality and mechanism design shape how each behaves under stress. This kind of structural thinking is how we approach crypto at Qatobit. Explore our research.