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Compare the Capital Efficiency of Fiat-Backed Vs. Over-Collateralized Stablecoins

Fiat-backed are highly efficient (near 1:1 ratio); Over-collateralized are inefficient (e.g. 1.5:1 ratio) due to the volatility buffer requirement.
Greeks.Live22.11.25

Compare the Capital Efficiency of Fiat-Backed Vs. Over-Collateralized Stablecoins.

Fiat-backed stablecoins are considered highly capital efficient because they operate on a near 1:1 collateralization ratio (e.g. $1 fiat for 1 stablecoin).

This means almost all deposited capital is used to back the stablecoin supply. Over-collateralized stablecoins are significantly less capital efficient, as they require a substantial excess buffer (e.g.

$150 crypto for $100 stablecoin) to account for collateral volatility. This trade-off reflects the difference between a centralized, low-volatility backing and a decentralized, high-volatility backing.

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