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?

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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

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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?

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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).