DSM Scenario Analysis

How Does the DSM Operate Across Different Market States?

Scenario Analysis

Dual Stability Mechanism Tree

According to the combination of the market price of USC and the state of the protocol’s reserves, arbitrage opportunities are defined and executed internally by the protocol. Below is a detailed description of each scenario within the Dual Stability Mechanism (DSM):

Above $1

State of Excess Reserves and Above $1

Effect:

  1. USC Spot Price retains the targetPrice of $1:

    • This adjustment helps align the market price of USC with its intended $1 peg, ensuring stability within the protocol.

  2. uscTotalSupplyValue rises towards reserveValue:

    • The total supply value of USC increases, bringing it closer to the reserve value.

At $1

tate of Excess Reserves and At $1

Effect:

  • uscTotalSupplyValue rises towards reserveValue:

    • The total supply value of USC increases, aligning it to the reserve value, which enhances the stability and balance of the protocol.

Below $1

State of Excess Reserves and Below $1

Effect:

  • reserveValue decreases towards uscTotalSupplyValue:

    • The value of the protocol’s reserves decreases, bringing it closer to the total supply value of USC. This adjustment helps restore balance between the reserves and the circulating USC supply, ensuring the stability of the system.

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