Decentralization Ratio
| Decentralization Ratio - the ratio of decentralized collateral value over the total supply of stablecoins backed for those assets. In other words, the decentralization ratio measures how much of the total value of a given stablecoin is backed by decentralized collateral, as opposed to centralized collateral. The decentralization ratio is an important metric to consider when evaluating stablecoins, as it can give insights into the level of risk associated with the coin. A higher decentralization ratio indicates a more decentralized collateral base, and thus a lower risk of the stablecoin being impacted by a single event (such as the collapse of a centralized exchange). Conversely, a lower decentralization ratio indicates a more centralized collateral base, and thus a higher risk of the stablecoin being impacted by a single event. As such, when evaluating stablecoins, it is important to consider both the decentralization ratio and the overall collateral base. A high decentralization ratio is only valuable if the overall collateral base is large enough to provide adequate stability for the coin. |
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