One of the four main types of stablecoins is a crypto-backed stablecoin. To account for the volatility of cryptocurrency prices, they are typically overcollateralized by an underlying cryptocurrency asset. Crypto-backed stablecoins are issued on-chain with cryptocurrency as the underlying collateral. A user can obtain a crypto-backed stablecoin by entrusting their cryptocurrency to a smart contract in exchange for stablecoins. A user can withdraw their original collateral by paying the stablecoins back into the same smart contract.
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