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Is a Crypto-Backed Stablecoin More Decentralized than an Algorithmic One?

Crypto-backed is more decentralized than fiat-backed, but algorithmic aims for pure code-based decentralization, often at a higher systemic risk.
Greeks.Live22.11.25

Is a Crypto-Backed Stablecoin More Decentralized than an Algorithmic One?

A crypto-backed stablecoin, especially an over-collateralized one like Dai, is generally considered more decentralized than a fiat-backed one, but its decentralization compared to an algorithmic one is debatable. Crypto-backed stablecoins are governed by decentralized autonomous organizations (DAOs) and rely on on-chain smart contracts.

Algorithmic stablecoins aim for pure decentralization by relying only on code and market incentives, but their reliance on a complex, unproven mechanism introduces a different type of systemic risk. The 'decentralization' of a crypto-backed stablecoin is often more robust and proven.

How Does the Backing Mechanism of a Stablecoin Influence Its Regulatory Classification?
How Is Hedging Different from Speculation Using Derivatives?
What Is the Difference between a ‘Fiat-Backed’ and a ‘Crypto-Backed’ Stablecoin?
Why Is This Risk Not Present in Fiat-Backed Stablecoins?

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