Asset Backed On-Chain:
Backed by cryptocurrencies such as Ether, it is dependent on the stability of the cryptocurrency on the other side of the equation.
Backed by a “regular” fiat currency such as USD or euro, precious metals or other real-world assets. It requires trust in a opaque and centralised third party to hold the collateral.
Relies on a combination of algorithms and smart-contracts to maintain price equilibrium, it requires continual network growth and investment to provide capital and support a falling currency value.