ROUTE 06 / Start here
What backs a stablecoin?
Follow issuance, reserve assets, redemption, and a broken peg.
A target price is a design goal. It is not a complete description of the asset. A stablecoin may depend on reserves at financial institutions, volatile onchain collateral, market incentives, or a combination. Read the claim and the exit process separately.
- 01
Stablecoins and the peg
Identify the target
Ask which unit the token aims to track and what mechanism supports that target.
- 02
Follow offchain reserves
Reserve composition and direct redemption access matter.
- 03
Follow onchain collateral
Overcollateralization creates buffers, not immunity to losses.
- 04
Algorithmic stablecoins and reflexive backing
Inspect reflexive incentives
A mechanism that relies on a related token can weaken when confidence falls.
- 05
Oracles and outside information
Check price dependencies
Collateral systems may depend on external observations.
CHECK YOUR UNDERSTANDING
Does a token trading at one dollar prove it has one dollar of redeemable reserves?
Reveal the explanation
No. A market price reflects trades. Backing, legal redemption rights, operational access, and asset liquidity are distinct facts that require evidence.