Mint & Burn Mechanism
Minting, burning & swapping of DUCA
Last updated
Minting, burning & swapping of DUCA
Last updated
The Mint and Burn Mechanism is a continuous process, it balances DUCA's supply and demand, stabilizing its market value. Operating autonomously, the Mint and Burn Mechanism is isolated from external market influences, guaranteeing that DUCA’s supply and demand are always aligned with its true market value.
When the demand for DUCA rises above the supply, new DUCA is created. This minting process utilizes DCM from the Stability Pool, priced at the current Market Value, and transfers an equivalent value into the Reserve, ensuring a consistent value is maintained. When there's more DUCA than needed, the excess is swapped for DCM from the Reserve at the protocol's defined Par Value, a predetermined baseline value, and then burned.
This process is controlled by the AMO, no outside influence can directly mint or burn DUCA.
Whenever there is demand for DUCA and the Stability Pool does not have sufficient DUCA available the Protocol will create new DUCA. DUCA is created with DCM (DuCa Mint) valued at the DCM Exchange Value and DUCA valued against the DUCA Exchange Value. Via the DMM the DCM Market Value will be determined. The Stability Pool receives DCM when creating DUCA and adds these DCM for 100% in the Reserve.
When DUCA Supply exceeds market demand a DUCA Burn event will be executed. Whenever there is DUCA present in the Stability Pool, the DUCA Supply in the Stability Pool will be decreased. DCM will be used from the Reserve to swap a pre-determined amount of DUCA from the Stability Pool for DCM valued at Par Value.
All DUCA received will be burnt, this process is fully automated and predetermined. The aim is to keep the DUCA Supply aligned with market demand.
Every 24 hours 10% of the DUCA Supply present in the Stability Pool will be burnt with a minimum of 10.000 DUCA per event. If there are fewer DUCA present in the pool all DUCA will be burnt.
When the number of DUCA in the Stability Pool exceeds 10% of the total Liquidity in the Stability Pool a DUCA Contraction event of 10% of the DUCA present in the Liquidity will be executed with a minimum of 10.000 DUCA per contraction.