ReSource
  • Welcome
    • Introduction
    • Protocol Architecture
  • Stable Credit
    • Stable Credit Lifecycle
    • Credit Risk
      • Overview
      • Risk Prediction and Mitigation
      • Underwriting
      • Network Assurance
      • Network Debt Account
      • Default Management
        • Obligation enforcement
    • Soft Peg
    • Stable Credits <> Fiat Loans
      • The Credit Pool
      • The Launch Pool
    • Configurability
  • Inter-Network Trade
    • Inter-Network Trade
      • Inter-Network Clearing House
      • How inter-network trade is facilitated
      • Export Risk
      • Export Risk Mitigation
        • Import Fee Structure
        • Import Fee Proceeds
        • Import/Export Limits
      • Varying Reference Currencies
  • Contracts
    • StableCredit.sol
    • AccessManager.sol
    • FeeManager.sol
    • AssurancePool.sol
    • CreditIssuer.sol
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  1. Stable Credit

Soft Peg

PreviousObligation enforcementNextStable Credits <> Fiat Loans

Last updated 1 year ago

Stable Credits are not hard-pegged to the reference currency. A hard peg would entail a mechanism through which Stable Credits could be swapped against the Reference Currency at a fixed price at any point in time. Such a mechanism is not supported, however the following secures a soft peg, which maintains Stable Credits’ perceived value to that of the Reference Currency:

  1. Defaulted Stable Credit debt converts into debt due in the Reserve Currency. This drives members to view their negative Stable Credit balance as denominated in the Reserve Currency, and hence price their offerings accordingly.

  2. Holders of positive Stable Credit balances can convert their holdings into Reserve Currency on a 1:1 basis if and when the Network Debt Account needs to be rectified.

  3. Since Stable Credits are created when credit is extended and destroyed when debts are repaid, the Stable Credit supply is always equal to the demand exercised on it by outstanding debt. This creates a supply/demand equilibrium which maintains price stability within the network.

  4. The Stable Credit supply/demand equilibrium is constantly maintained by the and .

AssurancePool
Network Debt Account
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