Collateralization

At BitUSD, we believe that collateralization is crucial to maintaining the stability of our stablecoin. That's why we require a minimum collateralization ratio of 120% for each btcUSD token. This means that for every btcUSD token minted, at least 120% of its value must be locked in a smart contract as collateral in BTCB tokens.

The primary purpose of this overcollateralization is to ensure the stability of the btcUSD token's value, even during market volatility. By requiring a high collateralization ratio, we can mitigate the risks associated with market volatility and ensure that the btcUSD token remains a secure and stable store of value.

When a user mints btcUSD, their BTCB tokens are locked in a smart contract until the btcUSD token is redeemed. This mechanism ensures that the collateral remains locked until the user decides to redeem their btcUSD token, providing an added layer of security and stability.

Our collateralization mechanism is designed to provide users with a high degree of transparency and security. The smart contracts that govern the BitUSD project are open-source and audited, ensuring that users can trust the system's security and transparency.

The collateralization mechanism of btcUSD is a vital component of our stablecoin. By requiring a minimum collateralization ratio of 120%, we can ensure the stability of the btcUSD token's value and provide users with a secure and stable store of value. The mechanism of locking BTCB tokens in a smart contract until the btcUSD token is redeemed further enhances the security and stability of our stablecoin.