Crypto-Collateralized Stablecoins: Reading Collateral Onchain

A crypto-collateralized stablecoin is one whose peg is backed by other crypto assets locked in smart contracts, held at a ratio above 100% so the buffer absorbs price swings before the token loses its dollar value. Where the collateral is crypto locked in a vault, you can read it directly: the deposited assets, the outstanding debt, and the exact price at which each position gets liquidated, block by block. That is a real difference from a fiat-backed token, where you trust an attestation. The qualification matters for the largest examples, though. DAI and USDS have taken on collateral that is not crypto in a vault, including real-world assets held through offchain legal structures, so the onchain view covers the crypto leg and not the whole balance sheet.

According to Allium's dataset (as of 18 September 2026), DAI has $5.1B in onchain circulating supply and USDS has $6.6B, with SUSDS at $4.7B. Those three sit inside a total tracked onchain stablecoin supply of $335B, where USDT ($192.9B) and USDC ($78.0B) dominate. Crypto-collateralized designs are a small share of the market, but they are the category where the crypto leg of collateral is observable block by block rather than on a reporting cadence.

Key takeaways

• Crypto-collateralized stablecoins are minted against overcollateralized positions: you lock, say, $150 of ETH to borrow 100 units of a $1 token, so the peg holds even if the collateral drops.
• The safety margin is a public number. Collateralization ratio, liquidation price, and the debt ceiling per collateral type are all readable from the issuing protocol's contracts.
• Liquidations are the enforcement mechanism. When a position falls below its minimum ratio, anyone can trigger a liquidation and the collateral is sold to cover the debt.
• The risk that does not show up on a single position is correlation: if many vaults hold the same collateral and it drops fast, liquidations can cascade and depeg the token.
• MakerDAO's DAI and the newer USDS from Sky are the largest examples, with $5.1B and $6.6B in onchain supply respectively in Allium's data.

Why the buffer sits above 100%

Fiat-backed stablecoins aim for one dollar of reserves per token. Crypto-collateralized designs cannot do that, because the collateral itself moves in price. If a token were backed one-for-one by ETH and ETH fell 20% in an hour, the backing would be underwater instantly. Overcollateralization is the fix: the protocol requires more collateral value than debt issued, and the gap is the shock absorber.

MakerDAO, the protocol behind DAI, publishes minimum collateralization ratios per collateral type in its technical documentation. A volatile asset like ETH carries a higher required ratio than a stable one, because it needs a deeper buffer. The same asset can appear in multiple vault types with different ratios and different stability fees, so "the collateralization ratio" is really a set of numbers, one per vault configuration.

Here is what that buffer looks like on a single position. Assume a vault requires a 150% minimum ratio and you deposit ETH at $3,000 to mint 1,000 DAI.

The row that matters is the last one. Once the ratio breaks the minimum, the position is eligible for liquidation and the borrower does not choose when. That threshold is the number a careful observer watches, not the current price.

What a liquidation looks like block by block

When a position falls below its minimum ratio, the protocol lets a third party (often an automated bot called a keeper) repay the debt and take the collateral, usually at a discount that pays for the service. In Maker's system this runs through a collateral auction, described in the protocol docs. The borrower keeps whatever collateral remains after the debt and a liquidation penalty are covered.

Every step of that is onchain. A liquidation produces a transaction: the keeper's address, the vault that was hit, the collateral asset and amount seized, the debt repaid, and the penalty charged. That means you can measure the health of a crypto-collateralized stablecoin in ways you cannot for a fiat-backed one. You can count how many positions are within a few percent of their liquidation price, how concentrated collateral is in one asset, and how liquidations behaved during the last sharp drawdown.

Worked example of the keeper's incentive: a 1,000 DAI debt liquidated with a 13% penalty means the borrower's collateral is sold to cover 1,130 DAI of value. The keeper’s incentive is the discount at which it buys the collateral; any surplus after the debt and penalty returns to the vault owner. That spread is why liquidations happen automatically and near-instantly during volatility, and why the peg usually holds even when collateral is falling.

The risk overcollateralization does not remove

A single overcollateralized vault is easy to reason about. The systemic risk is correlation and speed. If most collateral is the same asset, a fast enough price drop can push a large share of positions under water at once. Liquidations then sell that collateral into a falling market, pushing the price down further and triggering more liquidations. This is the cascade that stress-tests any crypto-collateralized stablecoin.

Two secondary risks sit underneath it. The first is oracle risk: the protocol needs an accurate price feed to know when to liquidate, and a stale or manipulated feed can either trigger wrongful liquidations or fail to trigger real ones. The second is collateral drift toward less-volatile backing. Sky, the protocol formerly known as MakerDAO, documents its collateral types in its documentation, and the mix has included less-volatile assets alongside crypto. For anyone reading collateral onchain, the practical consequence is that the onchain view covers the crypto leg and the rest sits in offchain structures. We cover the broader peg failure modes in our stablecoin risk guide, and the SVB episode showed how fast confidence in backing can move in a real depeg event.

Turning collateral health into a number you can compare

Reading one vault from a block explorer is straightforward. Assessing the health of an entire crypto-collateralized stablecoin, or comparing DAI's collateral profile against USDS or a competitor, is a data problem. Every vault deposit, mint, repayment, and liquidation is a separate event, emitted by different contracts, sometimes on different chains, and the meaningful fields (collateral asset, deposited amount, USD value at that block, outstanding debt, liquidation price, penalty) have to be extracted and aligned before any of it is comparable.

To answer a question like "what fraction of outstanding supply is within 20% of its liquidation price right now," every position has to resolve to the same fields at the same point in time: collateral asset, collateral USD value, debt, and the liquidation threshold for that vault type. Allium ingests raw data from 150+ blockchains and standardizes it into a stablecoins vertical with those fields already normalized, so a position on one protocol can be measured against a position on another. That normalization is what lets Allium's stablecoin datasets express supply, collateral, and flow consistently across issuers rather than one contract at a time.

The takeaway for anyone evaluating a crypto-collateralized stablecoin: the peg is only as strong as the collateral buffer and the liquidation machinery behind it, and both are measurable onchain in real time. That transparency is the whole point of the design.

Frequently asked questions

What is the difference between crypto-collateralized and fiat-backed stablecoins?

Fiat-backed stablecoins hold dollars, treasuries, or cash equivalents off-chain and target one dollar of reserves per token, verified through periodic attestations. Crypto-collateralized stablecoins are backed by crypto assets locked in smart contracts at more than 100% of the token value, and the crypto portion of that collateral is visible onchain at all times, while any real-world-asset collateral sits behind offchain structures. The overcollateralization exists because the crypto backing itself changes in price.

Why do crypto-collateralized stablecoins need to be overcollateralized?

Because the collateral is volatile. If a token were backed one-for-one by an asset like ETH and that asset dropped even slightly, the backing would fall below the outstanding debt. Requiring, for example, 150% collateral means the price can fall meaningfully before the position is at risk, and the buffer gives liquidators time to sell collateral and cover the debt while the peg still holds.

What triggers a liquidation in a crypto-backed stablecoin system?

A position is liquidated when its collateralization ratio falls below the protocol's minimum for that collateral type. At that point the protocol allows a third party to repay the debt and seize the collateral, usually at a discount plus a liquidation penalty. The borrower does not control the timing. The whole event is recorded onchain, including which address performed the liquidation and how much collateral was sold.

What are the largest crypto-collateralized stablecoins?

DAI and USDS, both from the Sky protocol (formerly MakerDAO), are the largest. According to Allium's dataset as of 18 September 2026, DAI has $5.1B in onchain circulating supply and USDS has $6.6B, with SUSDS at $4.7B. They remain a small share of the $335B total tracked onchain stablecoin supply, which is dominated by fiat-backed USDT and USDC.

Can you see how healthy the collateral is at any moment?

Yes. For crypto-collateralized stablecoins, deposits, minted debt, price feeds, and liquidations are all onchain events. That means an observer can compute the current collateralization ratio of individual positions, measure how many are close to their liquidation price, and see how collateral is concentrated across assets. This is the main structural advantage over fiat-backed designs, where reserve backing is only visible on a reporting cadence.

What is the biggest risk to a crypto-collateralized stablecoin peg?

Correlated, fast collateral price drops. If most positions hold the same asset and it falls sharply, many vaults can breach their minimum ratio at once, forcing liquidations that sell collateral into a falling market and push prices down further. Oracle failures, where the price feed is stale or manipulated, can amplify this by mistiming liquidations.

Interested in learning more about Allium’s stablecoin data? Speak to someone on the team.

Informational only. Not investment, legal, accounting or tax advice.