In a Fractional Reserve Stablecoin, How Does the Mint and Burn Process Operate?

A fractional reserve stablecoin only backs a portion of its circulating supply with collateral (e.g. 50%).

When a user mints, a stablecoin is created with only partial collateral. The system relies on the assumption that not all users will redeem at once.

Burning still removes the stablecoin, but the reserve management is key to maintaining confidence.