How Does the Transparency of Reserves Affect the Trust and Utility of a Fiat-Backed Stablecoin in DeFi Derivatives?

High transparency, typically through regular, credible audits of the reserve assets, builds trust in the stablecoin's ability to maintain its peg. In DeFi derivatives, this trust is critical because the stablecoin is the collateral and settlement asset.

Lack of transparency raises doubts about the 1:1 backing, increasing the perceived run risk. Low trust leads to reduced utility, as traders demand a risk premium to hold or use the coin, potentially causing a discount (soft depeg) and fragmentation of liquidity across the DeFi ecosystem.