Quiz: Stablecoins 4 questions · 80% to pass 1. A fiat-backed stablecoin like USDC maintains its peg by:An algorithm that prints or burns tokensHolding actual dollar reserves (cash and short-term treasuries) equal to the tokens in circulationGovernment guaranteeBitcoin collateral locked in a vaultFiat-backed stablecoins like USDC hold real-world reserves (cash, Treasury bills) in regulated financial institutions. Each token is redeemable 1:1 for a US dollar. Regular attestations verify the reserves match the circulating supply.2. The Terra/UST collapse demonstrated that algorithmic stablecoins:Are always safeCan enter a death spiral where the peg breaks and the mechanism designed to restore it accelerates the collapse insteadAre backed by the US governmentCannot lose value below $0.99Terra/UST used an algorithmic mint-and-burn mechanism with LUNA to maintain its dollar peg. When confidence broke, the mechanism that was supposed to restore the peg (minting more LUNA) instead hyperinflated LUNA and destroyed both tokens. $40 billion in value evaporated in days.3. RLUSD is significant because it is:An algorithmic stablecoin on EthereumA regulated, fiat-backed stablecoin issued by Ripple on the XRP LedgerA cryptocurrency that fluctuates in valueA government-issued central bank digital currencyRLUSD is Ripple's regulated US dollar stablecoin issued natively on the XRP Ledger. It combines the speed and low cost of XRPL settlement with dollar stability, enabling institutional-grade payments and DeFi without price volatility.4. The key risk difference between USDC and USDT is:USDT is larger so it is saferUSDC provides regular third-party attestations of reserves while USDT has faced scrutiny over the transparency and composition of its backingUSDC only works on EthereumThere is no meaningful difference in riskUSDC (Circle) publishes monthly reserve attestations from a major accounting firm showing full backing in cash and short-dated Treasuries. USDT (Tether) has historically been opaque about its reserves and has disclosed holdings in commercial paper and other less liquid assets. Check answers Retake quiz Back to lesson Next lesson →