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Stablecoin Peg Mechanics

Fiat-collateralized, crypto-collateralized, algorithmic. Three peg architectures.

A free, animated stablecoin peg mechanics you can read here or embed on any website, from Scrollchart.

Stablecoin Peg Mechanics

Stablecoin Peg MechanicsThree architectures, three failure modes. Fiat > crypto-collateral > algorithmic risk ladder.Fiat-CollateralizedUSDC / USDTCrypto-CollateralizedDAI (MakerDAO)AlgorithmicUST (collapsed 2022)User deposits $1 fiatCustodian holds USD in bank1 USDC minted on-chainRedeemer returns USDCCustodian releases $1 fiatUser locks $1.50 ETHVault opened (150% CR)1 DAI minted (max $0.66)Stability fee accrues (5%)Liquidation if CR < 150%1 UST = $1 of LUNA burnedArbitrage holds peg above $1Sell pressure: mint more LUNALUNA hyperinflates, trust breaksDeath spiral: peg collapsesCR 150%+Regulatory / custodian riskLiquidation cascade riskReflexivity / death spiralKey insight:Fiat-backed = off-chain trust. Crypto-backed = on-chain overcollateral. Algo = pure reflexivity, no external anchor.

Three architectures side-by-side: USDC (1:1 fiat), DAI (overcollateralized crypto), UST-style algorithmic. Failure modes annotated.

Good for

  • Stablecoin comparison articles for crypto and fintech publications
  • DeFi risk education covering peg mechanism tradeoffs
  • Regulatory briefings on stablecoin collateral models

Source & accuracy

This stablecoin peg mechanics is an editorial illustration built to represent the concept accurately. Where it shows figures, they are typical or representative values chosen to make the relationship clear, not a single underlying dataset. The diagram and its explainer are reviewed and maintained centrally, and updated over time as understanding improves.

Three architectures for price stability

Fiat-collateralized stablecoins (USDC, USDT) hold reserves in a bank, with 1:1 backing. An issuer accepts deposits of fiat currency and mints tokens equivalent to the reserve. This model is the simplest and most trusted but requires institutional custody. Crypto-collateralized stablecoins (DAI) require borrowers to post crypto collateral worth more than the loan in the stablecoin. Smart contracts maintain the peg through overcollateralization and liquidation mechanics. Algorithmic stablecoins rely on mint and burn incentives without explicit collateral, using arbitrage to restore the peg when it drifts.

Peg maintenance and failure modes

Fiat-collateralized stables rarely lose peg because redemptions are guaranteed by the issuer. Crypto-collateralized stables can experience peg failures if collateral values fall faster than liquidations can occur. Algorithmic stables are the most fragile, requiring sustained demand for the mechanism to function. The 2023 UST collapse demonstrated that peg failure in algorithmic designs can be complete and irreversible.

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Reference

What this is
A free, embeddable, animated stablecoin peg mechanics for any website.
Who uses it
Crypto / Web3 blogs, Fintech content sites.
How to embed
Copy one line of HTML. No signup. No watermark. Works in WordPress, Webflow, Ghost, Substack, plain HTML.
File size
iframe embed, ~80 KB gzipped (loads on demand, does not block your page paint).
License
Free forever. Editorial explainer text included; updated centrally over time.
URL
scrollchart.com/diagram/stablecoin-peg-mechanics

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Frequently asked questions

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Scrollchart provides "Stablecoin Peg Mechanics" as a free, embeddable animated diagram you can add to any website with one line of HTML. No signup is required and there is no watermark. The diagram and its explainer text are served from scrollchart.com, so the embed stays current without any maintenance on your end.
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