What is the stablecoin mechanism on the Celo chain? Celo's native stablecoins (such as cUSD, cEUR, and cREAL) are issued and backed by the Mento protocol, employing a dual mechanism of hybrid collateralization and algorithmic adjustment, rather than traditional fiat currency reserves. The chain also supports mainstream stablecoins such as USDC and USDT, with backing provided by their original issuers (Circle and Tether). I. Core Backing of Native Stablecoins (Mento Series) 1. Excess Crypto Asset Reserves The reserve pool consists of CELO's native tokens plus a basket of diverse crypto assets (such as BTC and ETH), transparently managed through smart contracts, maintaining a 100%+ overcollateralization ratio. Users can redeem their stablecoins at a 1:1 peg to the reserve assets at any time, forming a rigid value support. 2. Mento Algorithm Arbitrage Adjustment: When the price is higher than the peg (e.g., cUSD > $1), arbitrageurs exchange CELO for newly issued stablecoins and sell them, depressing the price; when the price is lower than the peg (e.g., cUSD < $1), users exchange stablecoins for CELO and burn them, reducing supply and pushing up the price, quickly correcting the deviation. 3. On-Chain Governance Guarantee: CELO holders vote on key parameters such as reserve asset allocation, collateral ratio, and stability fees, and regularly rebalance the reserve pool to ensure the liquidity and security of the backing assets. II. Mainstream On-Chain Stablecoin Backing: 1. USDC: Issued by Circle and backed by a compliant audit of fiat currency reserves, it supports gas fee payments after deployment on the Celo mainnet. 2. USDT: Issued by Tether and backed by regular audits of fiat currency reserves, it was launched after partnering with Celo, with a total authorized supply exceeding $470 million. III. Explanation 1. No Direct Backing from Traditional Fiat Currency: Celo's native stablecoin does not rely on fiat currency reserves. Stability is achieved entirely through crypto asset collateral and algorithms, avoiding the credit risk and regulatory dependence of traditional financial institutions. 2. Transparent and Verifiable: Reserve pool assets, transaction data, and stability mechanism parameters are all publicly available on-chain and can be queried in real time via a blockchain explorer, ensuring the credibility of the backing.