Stability Pool
LPD is the pool token of the Stability Pool
Last updated
LPD is the pool token of the Stability Pool
Last updated
The Stability Pool is a variation on a classic liquidity pool that is designed to provide stability in the Protocol. It does so by managing liquidity within the protocol and providing a 'nerve centre' within the overall incentive structure. The Stability Pool provides the over-collateralisation for DUCA and acts as a guarantor for the over-collateralisation of the DUCA Backed Assets. The required liquidity in DCM is provided by the market in return for LPD (Liquidity Provider in DUCA).
The Stability Pool runs on DCM which needs to be provided by the open market. Liquidity providers can provide liquidity to the Stability Pool, and DCM is sent to the Protocol in return for the liquidity pool token (“$LPD”). LPD has an elastic supply with no maximum and its exchange value is pegged to DCM via a fixed formula.
When providing liquidity in DCM the liquidity provider gets LPD tokens in return following this calculation: . The lpRATE will represent the value of LPD in relation to DCM, has a starting value of 1 and is denominated in DCM. When withdrawing liquidity, the calculation is as follows:
.
The lpRATE represents the ratio between the DCM Liquidity in the Stability Pool versus the outstanding LPD tokens.
Whenever liquidity is withdrawn from the Stability Pool by sending in the LPD an Exit Fee is applicable. The Exit Fee provides a threshold to exit and reduces the volatility of the pool size. Initially, the Exit Fee will be set to 2% and will be 100% burnt, therefore increasing the lpRATE.
The minimum amount of liquidity in the Stability Pool, under all circumstances, is 100% of the DUCA Market Cap, based on the DCM Market Value. This is with a maximum of 98% of the net circulating supply of DCM.
Guardrails: - Whenever the size of the Stability Pool goes below 75% of its target minimum size, 5% will be instantly rebased and added to the Stability Pool. This means technically that the pool size can never go below 75% of the value of the DUCA Supply. - Whenever there is less than 2% net circulating supply in DCM the minimum Stability Pool size requirement is turned off.