II. Types of Stablecoins:

1) Fiat-collateralized Stablecoins:

Typically operate on a 100% reserve mechanism, meaning that to issue $1 of stablecoin on-chain, $1 in cash or U.S. Treasury bonds must be collateralized.

In addition to 100% full collateralization, there is also over-collateralization, but the latter is rare. Overall, the risk is low, primarily involving regulatory actions against the issuer or U.S. Treasury bond defaults.

In terms of issuers, currently, the stablecoins from two companies are particularly popular:

a. USDC, the protagonist of this new stock$Circle(CRCL.US) issued. Holds a U.S. payment license, operates on a 1:1 reserve mechanism, with clients primarily including$Coinbase(COIN.US) and other exchanges. The issuance scale is $1.2 trillion. The public blockchain platform used is Ethereum.

Operation mechanism: Institutional clients wire U.S. dollars, and Circle generates an equivalent amount of USDC on the blockchain, depositing the dollars into regulated accounts (e.g., Bank of New York Mellon, which charges custody fees) and earning interest from U.S. Treasury bonds (4.5% interest rate).

b. USDT, issued by Tether; holds a U.S. payment license. The issuance scale is $1.5 trillion, and the public blockchain platform used is TRON.

2) Algorithmic Stablecoins:

Luna, relies on algorithms to maintain stability, lacks underlying assets, and has no physical collateral. During the last Bitcoin rally, algorithmic stablecoins exploded and were gradually phased out.

Note: Currently, stablecoins collateralized by U.S. dollars and Treasury bonds account for 95% of the market.

$Robinhood(HOOD.US) $Digital currency concept(CP00079.US)