There are different ways to have synthetic assets backed by collateral.
A simple way of creating synthetic assets tracking a certain physical-world asset is to use the specific asset off-chain and hold it in custody of a trusted third party, for example USD held in a bank account. Tether is probably the most well-known example of this set up.
An alternative way is to use youves tracker tokens as collateral, regardless how the peg is managed. This outsources some of the complexity. However, if the tokens are created by another DeFi provider, it adds another set of moving parts and does not reduce the overall complexity, especially in terms of risk management.
As all current stable tokens experience price fluctuations, in practice even when using stable token collateral, a dynamically managed setup with some degree of over-collateralisation has to be used.
Thus, the goal is to use the youves tracker tokens of this platform to create more complex synthetic assets.
Stable tokens use a dynamically managed over-collateralization with eligible collateral to back the target value. Minters are required to maintain the collateralization ratio above the emergency collateral ratio. They can do this by either posting more eligible collateral to the vault or by burning some or all of the youves tracker tokens.
An advantage of this kind of setup is the ability to use any kind of collateral on the blockchain, so that there is no need to have youves tracker tokens as collateral or to have centralised off-chain assets held by trusted third parties. The disadvantage is that dynamic collateral management is more complex than just storing, say USD, in a bank account.
This is the setup chosen for the youves tracker tokens on this platform.
Once the collateralization ratio drops below the emergency collateral ratio, the vault becomes available for step in by third parties. They can post and burn a certain amount of youves tracker tokens in order to 1) get the vault back to target collateral ratio and 2) collect a bonus out of the excess collateral of the vault.
The step in is a crucial aspect of the incentive features of the platform to ensure adequate collateral backing.