Seeing stablecoin risk events always makes my heart tighten. Worrying about whether the reserve assets behind are sufficient, or if a black swan event might occur... Only after understanding the over-collateralization mechanism in depth did I realize what true safety design means.

In simple terms, over-collateralization is a kind of insurance mechanism. If you want to mint $100 worth of stablecoins, you can't just deposit $100 worth of assets—more is required. For example, depositing $120 worth of BTC, ETH, or other assets, with the extra 20% serving as a buffer during market volatility.

The benefits of this design are obvious.

First, the value of collateral always exceeds the debt size, so even if the market experiences a sharp decline, there is enough safety margin. The risk of liquidation is greatly reduced, and the system’s resilience is significantly improved. This is not just theoretical—actual data proves the point.

Second, the choice of collateral is not picky. Stablecoins like USDT, USDC are acceptable, mainstream assets like BTC, ETH are fine, and even other highly liquid assets can be used. This means you can unlock the liquidity of assets that would otherwise be idle, while also earning yields.

On the operational level, more projects are adopting neutral market strategies to manage collateral—no longer just cold storage, but actively hedging risks and seeking stable appreciation. This further strengthens the fundamentals of stablecoins.

In practical applications, these stablecoins are no longer just tools for trading and settlement. Users can participate in minting, staking for benefits, and ecosystem governance. An asset has evolved from a simple medium of exchange into a complete financial infrastructure.

Ultimately, over-collateralization brings the most valuable thing with the simplest logic: user peace of mind. In a market full of uncertainties, this conservative attitude of "keeping an extra reserve" actually embodies innovation.