Crypto-Backed Stablecoin
A crypto-backed stablecoin (DAI is the standard) holds its peg with on-chain collateral instead of bank dollars: lock $170 of ETH, mint $100 of DAI. If col
A crypto-backed stablecoin (DAI is the standard) holds its peg with on-chain collateral instead of bank dollars: lock $170 of ETH, mint $100 of DAI. If collateral value falls toward the loan, automatic liquidation sells it to protect the peg — no humans, no banks involved.
Why it matters
It’s the decentralization-respecting stable design — transparent reserves anyone can audit live, no freezer switch on ordinary holders. The price is capital inefficiency and reflexive risk: in a market crash, mass liquidations can strain the peg exactly when stability matters most. Know which backing your “dollars” rely on before you need them to hold.