The former is really inconvenient, especially if you want to transfer money. The latter is only available to a select few companies.
Everything is else at most assets denominated in (= pegged to) USD.
Does your critique apply to all these other categories as well? Why or why not?
This suggests that we need to look into the engineering details of a building (or peg arrangement) to determine whether we can trust it, instead of just declaring all building (or all pegs) 'nonsense'.
If there's oak and pigeons involved, that doesn't change much---apart from being might inconvenient.
The problem algorithmic stable coins is that the backing is either non-existent or at best really suspect.
Tether is a bit better in that they at least claim to have real world backing, but they don't tell you what it is, so you can't trust it.
Btw, the backing for a token denominated in USD doesn't have to be USD.
Eg most banks back their deposits with all kinds of assets and bonds, not just physical cash (or balanced at the Fed).
Having a few reserves in USD on hand is important, but in the longer run it's more important that the worth of your backing assets is reliably higher than your liabilities. The difference between the two is your equity cushion.