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What Is the Main Security Risk Associated with a Centralized Mint and Burn Mechanism?

Counterparty risk and single point of failure; users must trust the issuer to hold collateral and honor redemptions.
Greeks.Live23.11.25

What Is the Main Security Risk Associated with a Centralized Mint and Burn Mechanism?

The main risk is counterparty risk and single point of failure. The user must trust the central entity (the issuer) to hold the collateral securely, not to mismanage the funds, and to honor redemptions.

If the issuer is hacked, insolvent, or fraudulent, the stablecoin's peg can be broken, and users may lose their funds.

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