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Crypto-backed stablecoins use loans equivalent to over-collateralization to keep their value correctly linked.
Crypto-collateralized stablecoins are backed by a basket of one or more other cryptocurrencies. Due to the high volatility of these stablecoins, these stablecoins are highly over-collateralized and buyers are required to lock their mortgage tokens into smart contracts. If the value of the collateral drops too much, these tokens will be liquidated . It can replace the collateral collected by stablecoins.
One of the most famous crypto-backed stablecoins is MakerDAO’s DAI, which is pegged to 1 USD.However, as MakerDAO learned The event that the value of ETH was halved in less than 24 hours after being submerged by the clearing house during the “Black Swan” on March 12, 2020. It is crucial to ensure that the system can handle extreme situations-forcing it to implement substantive governance and auctions Management change. This is a success. At the time of writing, the market value of stablecoins exceeds $4.8 billion.
There is some competition this summer from Free tons, A completely decentralized blockchain project. Once the messaging company that created it withdrew after a legal battle, the project took over the work of Telegram’s open network blockchain.
This summer, Free TON plans to release stablecoin brothers for its TON Crystal token. The liquidity of stablecoins will be 100% backed by the locked ether, providing potential returns for liquidity providers. It will be “widely used in services with recurring subscriptions and high-risk products,” said TON Labs, the core developer of the Free TON project.
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