⚖️Price Stability

The Over-Collateralized Stability Model

Oceanos Finance's $ocUSD operates on an over-collateralized model, ensuring that each $ocUSD is always supported by more than $1 in collateral. This foundational aspect should alleviate concerns about $ocUSD falling below its peg. Borrowers have a strong incentive to maintain the peg by repurchasing $ocUSD if necessary, to recover their collateral from CDPs. Thus, users should be more vigilant about 'upside' volatility rather than downside.

Arbitrage and Peg Maintenance

Should the price of $ocUSD rise significantly above its peg, it creates an arbitrage opportunity. For instance, with a 150% Collateral Ratio limit, and $ocUSD trading at $1.5, depositing $1,500 worth of $ETH allows minting 1,000 $ocUSD, which can then be exchanged for $1,500 worth of $ETH, and so on. This process can be repeated until $ocUSD's price returns to its peg, essentially creating a 'money-printing' scenario for users.

The key focus for users is when $ocUSD trades above $1 and below the threshold set by the formula $(Collateral Ratio / 1)—with an initial Min_CR of 150%, this upper limit is $1.5.

Market forces typically drive $ocUSD towards its peg as users are motivated to borrow more when it trades at a premium and are discouraged from repaying debt when it costs more to do so.

Protocol Adjustments for Price Stability

If $ocUSD consistently trades above its peg, Oceanos Finance's governance can tweak protocol parameters to correct the course. Adjusting the $ocUSD Savings Rate affects market demand, while a (negative) Borrowing Rate incentivizes users to mint more $ocUSD by effectively rewarding them for borrowing. These measures address both supply and demand to stabilize the market.