A collateral ratio is the value of collateral relative to the value of the stablecoin debt or claims supported by that collateral, usually expressed as a percentage.
Collateral ratios are central to many crypto-collateralized stablecoin systems. Protocols can define a minimum ratio for opening or maintaining a position and a separate threshold that triggers liquidation. The relevant asset prices usually come from one or more price feeds or oracles. Ratios can change rapidly when collateral prices move, even if the amount of stablecoin debt remains unchanged.
The collateral ratio is a measurement. Overcollateralization describes the condition in which that ratio exceeds the level needed to cover the associated stablecoin obligation.
The ratio determines how much price decline a collateralized position can absorb before reaching its liquidation threshold.
Collateral worth $180 against $100 of stablecoin debt produces a collateral ratio of 180%.