Glossary
Crypto-Backed Stablecoin
A stablecoin minted against over-collateralized positions in volatile crypto assets, with on-chain liquidation keeping the system solvent.
Crypto-backed stablecoins (DAI, LUSD, sUSD historically, GHO) mint new units against locked crypto collateral. Because the collateral is volatile, positions are over-collateralized — typically 130–200% — and liquidated automatically if their ratio falls below a threshold.
The model has the advantage of on-chain auditability — anyone can verify the collateral — and the disadvantage of capital inefficiency: you have to lock $150+ to mint $100. Real-world-asset collateral has crept into several designs to soften that trade-off.