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How Does the “Mint and Burn” Mechanism Work for Stablecoins?

Minting increases supply with collateral; burning decreases supply upon redemption to maintain a stable value peg.
Greeks.Live23.11.25

How Does the “Mint and Burn” Mechanism Work for Stablecoins?

It is used to maintain a stablecoin's peg, often to a fiat currency like the USD. When a user deposits collateral (e.g.

USD), new stablecoins are "minted" and issued to them, increasing supply. When a user redeems stablecoins for the collateral, the returned stablecoins are "burned," reducing the supply.

This process ensures the supply dynamically adjusts to meet demand while keeping the value close to the peg.

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