Maintaining Peg

Basic Scenarios

The following are some basic scenarios of how each of the various levers could work independently

Savings Rate

If STABLEx is trading above $1 governance could vote on increasing the savings rate. By increasing the savings rate it would mean there are more tokens being printed and as such more people who are more likely to sell their tokens, which will bring the price back down towards $1

Interest Rate

If STABLEx is trading below $1 governance could vote to increase the interest rate. By increasing the interest rate it would make it more expensive for borrowers who have active vaults open. They would be incentivised to buy STABLEx and repay their debts

Collateral Ratio

If STABLEx is trading above $1 then governance could vote to decrease the collateral ratio. By decreasing collateral ratio minters are able to leverage more (e.g. if they could get 1 STABLEx for every 5 yUSD, afterwards they could get 2 STABLEx for every 5 yUSD) and as such there would be more supply in the market. The same will then occur as people sell their tokens

Complex Scenarios

Where ArcX becomes powerful when maintaining the peg is utilising all 3 of these levers to try and adjust and maintain the peg. The following example is not an exhaustive list but is to illustrate a potential way

STABLEx is below $1

If STABLEx is below $1 governance could increase the savings rate and interest rate concurrently. By increasing the savings rate it would increase the number of people who would want to hold STABLEx tokens and to earn using STABLEx. However if we just increased the savings rate people could simply mint and there would be no impact on the price.

When combined with increasing the interest rate, it makes it more expensive for individuals to mint tokens and as such people would be incentivised to buy the token and stake it in the savings contract instead of simply minting

STABLEx is above $1

If STABLEx is above $1 governance could choose to decrease the collateral ratio and increase the savings rate. Increasing the savings rate would have the same effect as increasing in the example above however in this case we don't want people to buy the tokens. As such we can counter balance this by decreasing the collateral ratio.

A decrease in the collateral ratio would allow minters to mint even more STABLEx than current and have a greater downward price pressure than simply just increasing the STABLEx savings rate