Stablecoins can be divided into three categories based on collateralization methods: fiat-collateralized (centralized), over-collateralized (decentralized), and algorithmic/partially collateralized.

Fiat-collateralized (centralized): Each stablecoin has a corresponding amount of fiat currency reserves as backing. Representative projects include Tether (USDT), USDC, etc., which are typically issued by enterprises and backed by reserves of currencies like the US dollar and Euro. For example, when there are 1,000,000 USDT in circulation, the issuing organization needs to hold reserves of 1 million US dollars.

Over-collateralized (decentralized): Collateralized by crypto assets, stablecoins are generated through over-collateralization via smart contracts. Representative projects include MakerDAO's DAI and Liquity's LUSD, among others. Users must deposit cryptocurrency worth more than the issued amount of stablecoins (usually 200% or higher) as collateral. These stablecoins operate completely transparently, managed by decentralized protocols, without the need to trust a single centralized entity.

Algorithmic/partially collateralized: These stablecoins automatically adjust token supply through smart contracts and algorithms to maintain their peg. Partially collateralized (fractional-algorithmic) stablecoins like Frax (FRAX) have some fiat or crypto collateral and also adjust collateralization ratios dynamically via algorithms; purely algorithmic models like the early TerraUSD (UST) rely entirely on other tokens within their system (like LUNA) for minting and redemption to stabilize. HAY, USDR, and others also fall under the broad category of algorithmic or derivative models.