Definition ∞ A decentralized reserve is a pool of assets held and administered by a distributed network rather than a single centralized entity, typically backing a digital asset or protocol. Control over these assets is generally governed by smart contracts and community consensus mechanisms. This structure aims to reduce single points of failure and enhance transparency.
Context ∞ Decentralized reserves serve as a foundational component for many stablecoins and decentralized finance protocols, providing collateral or backing to maintain a peg or support liquidity. The integrity and composition of these reserves are under constant scrutiny, as their stability directly influences the trustworthiness and viability of the digital assets and financial services they support. This directly impacts overall market confidence.
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