Crypto-Backed Stablecoins: Overcollateral and Liquidation

The class in one paragraph

A crypto-backed stablecoin locks cryptocurrency in a contract. It mints tokens against the lock. The defining number is the ratio. The collateral must be worth more than the debt it backs. That is the whole safety design. The collateral itself is volatile, so the excess is the buffer. A fiat-backed token leans on a reserve portfolio. This class leans on excess collateral. It leans on the mechanics that manage it.

The old page implied the ratio in passing. This page states it as the class definition. Every mechanism below exists to defend that ratio.

How liquidation defends the ratio

When collateral value falls toward the debt, the protocol liquidates. It seizes enough collateral to close the position. It burns the tokens. Liquidation is not a failure state. It is routine. It keeps every open position covered as prices move. A position below its maintenance level gets closed by the system. No discretion is involved.

The failure mode is the crash that outruns the mechanism. Collateral can fall faster than liquidations close. The pool can end up short. That is the documented black swan of the class. The old page acknowledged it. This page keeps it as mechanism, not mood. The deeper the crash, the more the design leans on liquidation keeping pace.

The exemplars, with figures and no superlatives

The class exemplars here: the Sky dollar, its predecessor DAI, and Liquity’s LUSD and BOLD. Supplies carry dates. On 11 September 2026, on-chain reads put the Sky dollar at about 6.68 billion tokens. DAI read 4.58 billion. LUSD read 26.3 million. BOLD read 34.1 million. The old page called DAI the largest and most well-known example. This site drops superlatives. A superlative without dated criteria is an opinion. Supplies with dates are facts.

DAI launched in 2017. It was Maker’s overcollateralized dollar. The ecosystem later rebranded to Sky. The Sky dollar is the successor token. A protocol converter joins it to DAI at one to one ^{[1] [2]}. Both live. Both run. The rename story is told in full on the Sky dollar page.

Liquity’s pair carries its own design facts. LUSD’s documentation lists its collateral set. WETH, wstETH, and rETH only. Its FAQ describes the protocol as immutable ^[3]. BOLD runs as a current deployment beside a legacy one. Both are documented on the issuer’s technical resources page ^[4]. Two tokens. Two designs. One class.

The BOLD story carries an address lesson. The current deployment reads 34.1 million tokens. The legacy deployment is a separate contract, still live on chain. It reads 202,029.51 ^[4]. An explorer renders both without a label. The issuer’s technical page is the document that separates them. The address rule travels with this library. The issuer’s document names the current deployment. Nothing else does.

What backs the tokens

The collateral behind Sky’s dollars publishes through a dashboard. BA Labs, an independent analytics team. The official interface links to it. It is not an issuer attestation. This class is the corpus’s clear no-attestation case. Its verification model is on-chain reads. The composition categories and their attribution rules live on the Sky token page.

That is the structural contrast with fiat-backed tokens. The fiat class publishes reports on reserve portfolios. This class publishes contracts and dashboards. The reader’s move differs too. Read the report, or read the chain.

The contrast extends to what each asks you to trust. A reserve report asks for trust in an accounting firm’s procedures. Also in the issuer’s custodians. A collateral dashboard asks for trust in contracts that execute as written. Also in an analytics producer’s pipeline. Neither trust is free. Neither is total. The facts about each sit on this site’s token pages, sources and limits stated together.

The savings layer

The class carries its own yield instruments. The reporting rules are strict. Rates are variable. The protocol sets them. The read carries a date. The Sky interface stated a 3.60 percent savings rate on 11 September 2026 ^[1]. A fixed-term rate and vault rates sat beside it, on their own terms. The figures live on the token page. What belongs here is the mechanism. In this class the saver’s yield is paid by borrowers and protocol revenue. Not by a reserve’s interest. That split shapes the risk. It shapes the documents too.

What the class is not

The class is not an algorithmic design. Supply contracts through debt repayment. It contracts through liquidation against real locked collateral. It never contracts through an algorithm minting tokens to defend a peg. Older copy filed DAI under algorithmic. That taxonomy error gets corrected explicitly here. DAI has been crypto-backed since launch ^[2]. The algorithmic page tells the other class’s story. Including its terminal case.

The class is also not a risk ranking. Crypto-backed tokens carry collateral risk. That is a mechanism statement. The old page said they were less risky than other cryptocurrencies. That is a verdict. Verdicts are off-limits here.

Where this page sits

The stablecoin intro maps the four classes with this page as the crypto-backed branch. The Sky dollar page carries the class flagship’s supply, collateral, and savings figures in full, and the stablecoins hub frames the pillar. The cryptocurrency hub is this page’s home root.