Counter-Party Risk Management
What happens if there’s a huge flash crash in AVAX price?
In the rare scenario of a substantial AVAX price crash where the rebalancing pool and minting incentives prove ineffective in restoring system stability, the value of xAVAX can potentially plummet to zero. In such a situation, aUSD would have sole claim on the reserve. If this occurs, the NAV of aUSD would no longer remain stable but would instead mirror the complete price fluctuations of AVAX. Nonetheless, aUSD would still be redeemable.
What happens if sAVAX depegs from AVAX?
The protocol incorporates an automatic emergency mechanism designed to safeguard holders of aUSD and xAVAX in the event of a potential sAVAX depegging. Utilizing multiple oracle feeds, the protocol monitors whether the price of sAVAX has deviated by more than 1% from the price of AVAX. If such a deviation occurs, the minting and redemption functions are temporarily disabled
Once the sAVAX peg stabilizes, minting and redemption are reactivated. This mechanism serves to protect aUSD and xAVAX holders and eliminates the need for immediate intervention in the event of an sAVAX depeg.
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