Give an Example of a Prominent Over-Collateralized Stablecoin Protocol.
A prominent example is MakerDAO's Dai (DAI). Dai is a decentralized stablecoin soft-pegged to the US Dollar.
It is backed by a variety of cryptocurrencies, which are deposited into smart contracts called Vaults, and the collateral is always required to be worth more than the amount of Dai generated. This multi-collateral design, combined with liquidation mechanisms, helps maintain the peg in a decentralized manner.
Glossar
Soft Peg
Mechanism ⎊ A soft peg, within cryptocurrency and derivatives, describes a managed exchange rate regime where a currency or asset’s value fluctuates within a defined, yet relatively wide, band against another currency, asset, or basket of assets.
Decentralized Stablecoin
Architecture ⎊ A decentralized stablecoin leverages blockchain technology, typically employing smart contracts on platforms like Ethereum or Solana, to maintain a peg to a fiat currency or other asset.
MKR Token
Governance ⎊ The MKR Token functions as the governance asset for the MakerDAO protocol, granting holders the right to vote on key operational and risk parameters for the decentralized stablecoin Dai.
MakerDAO
Decentralized Stablecoin Issuer ⎊ This refers to the specific governance system responsible for managing the Dai stablecoin, primarily through the collateralization of various crypto assets in risk-assessed vaults to maintain the one-to-one peg with the reference currency.