Risk Mitigation Strategies
In a nutshell, anyone can mint, swap, transfer gStables. The protocol converts received USDD into a particular gStable, sends to the user and compounds the yields received on its stored USDD collateral. This increases the gStable's over-collateralization ratio over-time. Refer to the high level circuit below:
The protocol utilises the following strategies for maintaining an over collateralization ratio above 100%. This is to ensure that there is more USDD available for redemption should there be extreme exchange rate fluctuations in the real world:
Strategy 1: USDD as core collateral. gStables are backed only by USDD. This shields the protocol from crypto market volatility and enables stable, deep liquidity for gStables.
Strategy 2: JustLend. A portion of USDD yields from JL is distributed and compounded in the swap contract.
Strategy 3: USDD Vault. JL Yield generated from supporters' deposits are compounded into the swap contract.
Strategy 4: gSIP-01 Draft Proposal. This mechanics will expand the protocol with Non USDD vaults that enables a shared credit/lending facility which can aid in regulating gStable supply and increasing protocol's treasury collateral through usage.
Strategy 5: Under consideration. A simple launchpad where anyone can crowdfund the deployment of a new gStables region. The funds staked would seed the initial over-collateralization into the region swap contracts upon deployment eg. Lain America, Middle East & Africa, Asia Pacific etc
Fortunately, currently, Caribbean currencies do not experience wild market price swings and are considered historically to be relatively stable.
Please Note: These strategies currently minimizes the risks but cannot totally shield against extreme real world market volatility. However, due to the protocol's programmable nature onchain, many new strategies can be implemented over time to shield onchain market participants from some real world shock events.
Other strategies will be introduced in the future with community guidance.