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Pharos
PHAROSlive stablecoin signals

Six ways a stablecoin holds its peg

The mechanism a coin uses determines how it survives stress. These six explainers map each design — what produces the peg, where it tends to fail, and which Pharos signals fire first when it does.

At a glance

6 mechanisms
Stablecoin mechanism comparison matrix
MechanismCollateral locationRedemption rightYield sourcePrimary failure modeGovernance dep.Oracle dep.Jurisdiction dep.
Custodial Cash and Cash-EquivalentsOff-chain1:1—Banking-rail freezeLow—High
Tokenized TreasuryOff-chainNAVTreasury yieldRedemption gateLow—High
Crypto-Collateralized (CDP)On-chain cryptoVaultLiquidations + feesLiquidation cascadeMediumHighLow
Hedged Synthetic DollarOn-chain cryptoHedge unwindFunding rateFunding inversionMediumLowMedium
Reflexive / UnbackedNoneBurn—Reflexive collapseHighMediumLow
Tokenized Credit FundOff-chainFund gateCredit yieldNAV markdownLow—High

  1. 01.Custodial Cash and Cash-Equivalents

    Centralized issuers custody dollars in bank accounts and short-term Treasuries; tokens are minted and redeemed on demand.

    121 tracked · +19 upcoming · +1 frozen · +7 dead

    Read the explainer
    Users send USD via wire or ACH to the issuer; the issuer custodies the dollars in cash, repos, and short-term Treasuries; the issuer mints STBL 1:1 and lets holders redeem at any time.01User USDwire / ACH02Issuer reservescustodied 1:103STBL mintedredeem any time

  2. 02.Tokenized Treasury

    Regulated funds hold short-duration Treasuries; the token is a fund share that accretes NAV instead of trading exactly at $1.

    43 tracked · +3 dead

    Read the explainer
    Investors subscribe cash into a regulated fund; the fund deploys into short-duration T-Bills and repurchase agreements; STBL units represent fund shares whose NAV accrues daily from the underlying yield.01Investor cashsubscribed via fund02T-Bills + Reposshort-duration RWA03STBL unitsNAV accrues daily

  3. 03.Crypto-Collateralized (CDP)

    Overcollateralized vaults issue stablecoin debt; positions liquidate when collateral falls below a safety ratio.

    95 tracked · +3 upcoming · +1 frozen · +7 dead

    Read the explainer
    Users deposit crypto collateral worth more than the debt they want to issue; a vault or peg-stability module mints STBL as debt against the collateral; the position is liquidated if the collateral value falls below the configured safety ratio.01Crypto collateralovercollateralized02Vault / PSMmint debt vs collateral03STBL mintedliquidates below ratio

  4. 04.Hedged Synthetic Dollar

    Spot crypto plus an equal short perpetual position adds up to a roughly dollar-stable claim; yield comes from funding rates.

    29 tracked · +1 upcoming · +1 frozen · +4 dead

    Read the explainer
    Users deposit crypto as spot collateral; the protocol opens an equal-size short perpetual futures position to neutralize price exposure; the funding rate paid by perp longs flows to STBL holders as yield.01Crypto depositspot collateral02Long spot + short perpdelta-neutral hedge03STBL mintedfunding-rate yield

  5. 05.Reflexive / Unbacked

    The peg is held by protocol-level mint/burn rules and arbitrage incentives rather than by 1:1 reserves.

    6 tracked · +17 dead

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    Users burn a governance token to algorithmically mint STBL; an autonomous mint/burn module defends the peg through arbitrage incentives; the system has no 1:1 reserve backing, so confidence in the governance token is critical.01Burn governance tokenalgorithmic mint02Mint/burn AMOdefends peg via arbitrage03STBL mintedno 1:1 backing

  6. 06.Tokenized Credit Fund

    Regulated funds hold private credit, CLO tranches, or other non-Treasury debt; the token is a fund share whose NAV reflects credit losses and quarterly redemption gates.

    25 tracked

    Read the explainer
    Accredited investors subscribe cash into a regulated credit fund; the fund deploys into private credit, CLOs, or structured debt with real default risk and limited liquidity; STBL represents a fund share whose NAV reflects credit performance, with redemptions typically allowed only at quarterly windows.01Investor cashsubscribed via fund (KYC)02Private credit / CLOcredit risk, illiquid03STBL fund-shareNAV reflects credit losses