Collateralization Ratio

The ratio of reserve or collateral value to circulating stablecoin supply. A fiat-backed stablecoin targets exactly 1:1 (100 percent). Crypto-collateralized stablecoins like DAI deliberately over-collateralize — historically 150 percent or higher — because the crypto collateral itself is volatile and the buffer absorbs price swings. Under-collateralization (below 100 percent for a fiat-backed, or below the protocol's required ratio for a crypto-backed) is the precondition for a depeg. Some 'partially-collateralized' designs (FRAX historically) operate intentionally below 100 percent fiat backing, relying on protocol-controlled value or algorithmic stabilization for the residual.