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Stablecoins mechanisms in search for stability by Emilio Frangella
Explore the mechanisms behind stablecoins, a type of cryptocurrency pegged to a target through an algorithm, and learn about the decentralized protocol ARPEG and its innovative approach to stablecoin governance and interest rate adjustment.
- A stablecoin is not a stablestore value of a dollar, but rather a value pegged to a target through an algorithm.
- ARPEG (Automated Referral Program with Ethereum Governance) is a decentralized protocol for stablecoins.
- The goal is to create a stablecoin that tracks the price of the dollar, with the ARPEG protocol controlling the governance.
- There are two types of stablecoins: centralized (e.g., USDC, USDT) and decentralized (e.g., DAI, GO).
- A decentralized stablecoin like GO is generated through an algorithm, with a unique mechanism for adjusting the interest rate.
- The protocol works by creating a digital asset backed by a collateral deposit, which is then used to stabilize the value of the stablecoin.
- The ARPEG protocol has a mechanism for adjusting the interest rate algorithmically.
- The stablecoin is generated at the moment of redemption, with a fee paid at the moment of generation.
- The goal of the stablecoin is to maintain a stable price, with the protocol controlling the governance and the interest rate.
- The PEGKeeper state is used to track the price of the stablecoin.
- The protocol has a difficult task of balancing the stability of the stablecoin with the liquidity of the market.
- The stablecoin needs to have a strong demand, with the ability to adjust the interest rate.
- The protocol has a mechanism for incentivizing or disincentivizing the creation of new LUSD.
- The stablecoin needs to have a way to adjust the interest rate.