Commonly used ones include DAI (DAI) which is pegged to USD (USD) but backed by Ethereum (ETH).
These stablecoins are inherently more decentralised than their fiat-backed counterparts but suffer in other ways.
The most used crypto-backed stablecoin is DAI (DAI), the native stablecoin of one of DeFi’s forefathers and oldest protocols, MakerDAO. These types of stablecoins can track the value of a fiat currency through balancing mechanisms on the blockchain, which use the stablecoins’ backing to ensure price stability.
Crypto-backed stablecoins operate with an ‘I.O.U’ concept, more commonly known as a ‘security pledge’ to account for the volatility of the collateral. If Ethereum moves up by 20%, this needs to be accounted for via the security pledge to help maintain the 1:1 peg. If the peg is not able to be held, arbitrage opportunities may occur.