Risk Prediction and Mitigation

Network risk is mitigated by the constant adjustment of two network variables: The Reserve to Debt (RTD) Target and the Base Fee.

The RTD Target defines the desired ratio between reserved funds and the total outstanding debt of a given network. (read more under Assurance ).

The Base Fee is a reference from which individual member fees are deduced - comparable to the Prime Lending Rate used by commercial banks. While individual transaction fees levied on members are set by the network's CreditIssuer contract, the Base Fee serves as a starting point on top of which these individual fees are added.

In order to resolve these two variables, the Stable Credit protocol relies on an Assurance Oracle which perpetually collects network data, member data and external risk inputs. On the basis of these inputs the Assurance Oracle aims to predict the future default rate of a given network and the relative price of risk in the form of a reserves RTD target and a network's Base Fee rate.

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