Stablecoins, RWA & Tokenization

What is overcollateralization in stablecoins?

Overcollateralization in stablecoins means backing each coin with collateral worth more than the coin's face value, creating a buffer against price drops in the backing assets. It is common where the collateral is volatile crypto. For example, a system might require 150 dollars of crypto locked to issue 100 dollars of stablecoin, a 150 percent ratio. If the collateral falls in value, the extra margin helps keep the coin fully backed, and positions that drop too far can be liquidated. This cushion is a core defense against the peg breaking during market stress.