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What is Commodities Collateralize and Algorithmic Stablecoin (Stablecoin) (Altcoin)

• Commodities Collateralize Stablecoin is a stablecoin that is backed by physical assets such as precious metal like gold and silver, oil, real estate and more. This stablecoin also had it’s value pegged by the value of the asset itself.
• This type of stablecoin is a representation of commodities in a blockchain or crypto sphere and most of it was backed by reserves that was hold by the stablecoin distributor.
• Two of the examples for Commodities Collateralize Stablecoin is DigixDAO (DGD) and PAX Gold (PAXG).
• The usage of physical assets to back a stablecoin offer more stability and security in price of a certain stablecoin.
• This type of stablecoin are less volatile than others stablecoin that was back by fiat, crypto and algorithm. It’s also less likely to be affected by inflation that sometimes happen to Fiat Collateralize Stablecoin.
• The only problem with Commodities Collateralize Stablecoin is it have a low liquidity rate because commodities sales a way more complicated than other asset.
• Algorithm stablecoin is a stablecoin that was governance by algorithmic such as smart contract to pegged it’s value.
• In simpler term, it’s basically a stablecoin that was control by computer code or language that was made by human to control it’s price.
• This type of stablecoin mostly use two types of tokens which is the stablecoin itself and a cryptocurrency that backed the stablecoin and algorithmic will be use to regulate both of this token.
• The basic principles for algorithmic that was use in this type of stablecoin is when the value of that stablecoin goes up past the value that it was pegged, the supply will be added by the algorithm to keep up the peg value and vise versa.
• This type of cryptocurrency in most cases is not stable at all because it is way more vulnerable to depegging (value cannot be maintain) risk.
• Remember TerraUSD (UST), this is one of the examples of Algorithmic Stablecoin that has fail to keep it’s peg value. Most of the Algorithmic Stablecoin always run into this kind of issue and my guess is most of it was cause by the crypto or asset (mostly crypto) that back the stablecoin itself. Using only one crypto cannot keep the stablecoin pegged to it’s value in the long term.

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