$USC's peg stability & Redemptions
Last updated
Last updated
Each $USC is pegged to the value of 1 USD. As such, this parity between $USC and USD is anchored in the system as equilibria - users naturally view $1 to be the point of reversion for $USC during periods of volatility. In addition to this, any $USC that is minted, repaid or redeemed on Orby Network is settled at parity value of $1.
With this anchor point and condition in mind, there are actions that users can take in times where $USC is temporarily depegged:
If $USC trades for more than target price ($1):
Users deposit collateral and mint $USC
Users then sell $USC at higher price on the open market
Price gradually decreases back to peg
If $USC trades for less than target price ($1):
Users buy $USC at a lower price on the open market
Users repay their debt at parity value
Price gradually increases back to peg
Over time, these actions naturally bring the peg back to 1:1 and reinforces the validity of the soft peg.
Intrinsically, $USC has a price ceiling of $1.35. Since the protocol currently has a Minimum Collateralisation Ratio of 135%, anytime USC trades above $1.35, users can take out a minimum loan on their collateral to borrow $USC and sell it on the market. Even if a liquidation occurs they make a profit of the price difference between the market and $1.35.
In order to influence $USC’s stability in a more direct manner and enact a more active price floor, Orby has mechanisms in place to bring the price of $USC back to peg which includes:
