Three prevalent types of stablecoins dominate the market:

Fiat-Collateralized Stablecoins:

Examples include Tether (USDT), USD Coin (USDC), and TrueUSD (TUSD). These stablecoins are pegged to fiat currencies and are usually managed by centralized institutions, maintaining a collateral ratio of 1:1.

Crypto-Collateralized Stablecoins:

Dai, BitUSD, and sUSD fall into this category, backed by cryptocurrencies like Bitcoin and Ethereum. The collateral ratio is relatively low, often at 1:1.5 or 1:2.

Algorithmic Stablecoins:

Basis Cash and Frax represent this category, utilizing algorithms to regulate stablecoin prices through complex mechanisms such as elastic supply adjustments and incentive structures.

None of these stablecoin types provides a viable mechanism for offering substantial interest income to holders. This limitation arises from the fact that the underlying collateral assets, whether fiat or cryptocurrency, do not accumulate interest while idle.