There are three mechanisms underpinning stablecoins: algorithmic, asset-backed digital currency, and asset-backed traditional currency. - Algorithmic stablecoins utilize a rules based programmable code with the purpose of matching supply and demand of the token through open market actions. - Digital currency asset-backed stablecoins are those in which their value is based on the collateral of digital currency that is backing them–most often the supporting currency is Ether. - Traditional currency asset-backed stablecoins are those which use traditional central bank issued currencies as collateral to support the value of the stablecoin–most commonly the currency used is USD. There exist both stablecoins with decentralized governance models and those with centralized governance models. While centralized stablecoins are stabilized by a company’s actions or single entity’s actions, decentralized stablecoins use autonomous smart contracts governed by a community of token holders to stabilize the asset.

https://tradeblock.com/blog/the-hard-fork-weekly-market-commentary-from-tradeblock-10-01-2018