The Algorithmic Peg Stabilizer (APS) stands as the foundational mechanism for both minting and redeeming zunStables, as well as maintaining their peg to USD or ETH. APS empowers users to stake zunStables, offering a complex interest model and elevated profitability by additional ZUN rewards allocated if zunStables are locked for a period of 4 months, and a differentiated distribution of funds. These staked assets are subsequently harnessed to facilitate controlled inflation and deflation.
APS goes a step further by empowering users to stake zunStables, providing them with an intricate interest model that leads to elevated profitability, especially through the additional ZUN rewards allocated if zunStables are locked for a period of 4 months. This innovative approach not only diversifies the distribution of funds but also contributes to the controlled management of inflation and deflation. By harnessing these staked assets, APS reinforces the stability and longevity of the entire ecosystem.
The concept of APS draws inspiration from AMO of FRAX and bears resemblance to similar mechanisms such as Elixir from Alchemix. Just like the entire protocol, APS operates under the governance of DAO. In the event that the price of zunStables falls below or rises above the peg, any participant can initiate a DAO vote to determine whether deflationary or inflationary measures should be undertaken.
Let's explain the functionality using the example of the zunUSD/FRAXBP pool on Curve. If there is an imbalance in the pool towards an increase in the FRAXBP proportion, APS withdraws USDC from the pool, deposits them into Zunami, mints zunUSD, and then deposits them back into the pool. In case of an imbalance towards a large amount of zunUSD in the pool, APS either withdraws them to a vault strategy or performs zunUSD redemption, followed by withdrawing USDC and depositing them into the zunUSD/FRAXBP pool.
The benefits for the zunStables stakers (APS users) include:
Inexpensive deposit/withdrawal of funds through the vault strategy.
Rewards are automatically sold and reinvested. You recieve all power of compound interest
Funds are diversified and rebalanced across various zunStables pools.