One-To-One Backing describes a stablecoin model where each digital token in circulation is supported by an equivalent amount of a specific reserve asset. This design aims to maintain price stability by ensuring that every stablecoin can be redeemed for its pegged value. Common reserve assets include fiat currency or government bonds. This mechanism provides confidence in the stablecoin’s value.
Context
The integrity and transparency of one-to-one backing are central to the credibility of fiat-backed stablecoins, making them a frequent subject of regulatory scrutiny and public audit. Demonstrating full and verifiable reserves is critical for maintaining market confidence and avoiding de-pegging events. Debates often center on the composition and independent verification of these underlying assets.
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