Cryptocurrency backed stablecoins are issued with cryptocurrencies as collateral, which is conceptually similar to fiat-backed stablecoins. However, the significant difference between the two designs is that while fiat collateralization typically happens off the blockchain, the cryptocurrency or crypto asset used to back this type of stablecoins is done on the blockchain, using smart contracts in a more decentralized fashion.
For example, MakerDAO's DAI stablecoin is generated when someone opens a collateralized debt position (CDP), deposits some ETH as collateral, and then withdraws DAI from their CDP. The ETH acts as collateral.
- MakerDAO - DAI
- Synthetix - sUSD
- Bitshares - BitUSD