Stablecoin Design

These terms cover collateral models and basic mechanisms used to target a stable value on-chain.

Overcollateralization

Overcollateralization means locking collateral worth more than the issued stablecoin or loan, providing a buffer against price moves.

An algorithmic stablecoin targets a stable value primarily through on-chain rules and incentives rather than direct asset backing.

Minting creates new tokens and burning destroys tokens, changing total supply in response to deposits, redemptions, or protocol rules.

A redemption queue is a mechanism that processes withdrawals in order when immediate redemption is limited by liquidity or rate limits.