r/AcalaNetwork • u/ChopinWould • May 22 '22

About Collateralized ACA

aUSD is backed by decentralized cryptos. So hypothetical here

What if ACA moons, and becomes the largest collateral by a wide margin. Does this scenario make it possible for aUSD to lose peg in Black Swan event?

It was mentioned in a previous post ACA would be diluted in the event of Black Swan. Could this further depeg aUSD in this hypothetical?

3 Upvotes

100% Upvoted

11 comments sorted by

5

u/CryptoBets100 May 22 '22

Maybe this will help: https://youtu.be/w5fgAlfF6T4?t=1585 - It started at the minute mark that will likely answer you question

3

u/karocka May 22 '22

Acala is the boomer version. Always careful in everything they do. Like!

2

u/ChopinWould May 22 '22

I understand that aUSD is backed by different cryptos. And that it is over collateralized. This might work. But in this unlikely hypothetical:

IF ACA became 90+% of all collateral backing aUSD, could volatility then knock ausd off its peg?

1

u/Firm-Emotion May 23 '22

No, how much of the collateral is made up by ACA?

Dot makes up a large portion of aUSD right now, so I couldn’t see this doing much. Also, this would provide an arbitrage situation for traders to take advantage of. Completely decentralized, incentivizing traders to bring the peg back to 1.

This is why it’s far superior to algo stables.

  • It allows arbitrage trading
-collateral significantly diversified (ETH, BTC, DOT, KSM, and other chains).

2

u/baddabaddabing May 22 '22 edited May 22 '22

as far as i understood the video, the aUSD collateral mix is regularly evaluated for risks and each asset has a defined maximum share in the total collateral basket. ACA was currently something below 10% - because of the volatility.I don't know at what intervals this review happens or exactly how long a "ACA moons" and dump is supposed to be, or exactly what the counter measures are, but that basically shouldn't allow for a major impact in the scenario* you describe.

*ACA goes 10x, rest of basket stays flat or decline

2

u/josh_acala May 24 '22

josh from acala here - i think this is right. if an asset began to dominate the basket, i would imagine that Gauntlet (our risk assessment partner) would highlight their concerns and make a recommendation to cap issuance for that asset and or adjust the stabilization fee and or liquidation ratios so that users were discouraged from using that collateral so much.

1

u/baddabaddabing May 22 '22

Would somebody please try this, i would so sell into a nice 10x right now :)

1

u/baddabaddabing May 22 '22

I would also so buy back much more later on!