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How Does Collateralization Differ between Centralized and Decentralized Stablecoins?

Centralized use off-chain fiat/treasury reserves (trust-based); Decentralized use on-chain crypto collateral (trustless, auditable).
Greeks.Live04.11.25

How Does Collateralization Differ between Centralized and Decentralized Stablecoins?

Centralized stablecoins are typically backed 1:1 by fiat currency (like USD) or short-term treasuries held in a bank account, with the issuer holding the reserves. Decentralized stablecoins are backed by crypto assets, often in an over-collateralized manner, managed by transparent smart contracts on a blockchain.

The key difference is the custody and transparency of the reserves: centralized is trust-based, decentralized is trustless and auditable on-chain.

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