Crypto-Backed Stablecoin
A stablecoin collateralized by other crypto assets, over-collateralized to absorb volatility — DAI being the flagship.
A crypto-backed stablecoin is minted by locking crypto collateral in a CDP vault, as MakerDAO’s DAI is. Because the collateral (ETH and others) is volatile, the system requires over-collateralization — often 150%+ — so the peg survives normal price swings.
The trade-off versus fiat-backed coins: it’s more decentralized and censorship-resistant (no bank account to freeze), but capital-inefficient and exposed to the collateral crashing faster than liquidations can respond. DAI has also drifted toward holding some real-world and fiat-backed assets in its collateral mix, blurring the pure-crypto ideal in exchange for stability.