Dual Peg Enforcement
10mb Finance has dual peg enforcement mechanisms working in parallel:
With this dual peg enforcement mechanism, 10SHARE has two separate sets of functions. As part of the seigniorage system, the single 10SHARE pool emits 10mb tokens. As part of the fractional collateralization system, 10SHARE is required for 10MB minting and rewarded for redemption.
The dual sources of functionality should shore up the weaknesses of the component systems. Because the 10SHARE pool emits 10mb, it will have an intrinsic source of value and should not drop to zero, as happened with Iron Finance's Titan token. In addition, the minting and redemption cycle should strengthen the Tomb system's ability to regain peg. We have set the 10SHARE TWAP period to 45 seconds, which should also cement 10SHARE's utility in redemption.
When 10mb is above peg:
- The 10mb minting price rises, but not quite as much as the spot price
- A minting discount below spot price should encourage minting, which could add USDC to the treasury at more than 0.1 USDC/10mb
- This increases the effective collateralization ratio
- The protocol issues new 10mb to the 10SHARE pool
- 10BOND redemption bonuses are available above peg
When 10mb is below peg:
- No new 10mb is produced as 10SHARE staking rewards
- 10mb is removed from the circulating supply via 10BOND purchases
- 10mb can be purchased from the market and redeemed for 0.1 USDC worth of USDC + 10SHARE tokens
10mb Finance also has the DAO Treasury, which is envisioned partially as a price stabilization fund. However, buying up 10mb supply via the DAO treasury is meant as more of a backup plan. We hope that the powerful combination of the Seigniorage and Fractional Collateralization systems will enforce the peg.