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Pegged prices
tAssets maintain their priced pegged to the underlying metric by use of minting and auctions.
There are two prices we need to account for:
    Swap price
    Oracle price
The Oracle price is always true to the underlying metric, the swap price is influenced by the liquidity providers and it is going to peg to the oracle price by the mechanics described bellow

On an upwards price movement

When the oracle price increases, it also increases the price for the collateral requirements minters have to deposit in their CDP positions. Let's see an example

T0

tAssetA swap price: 100 BUSD tAssetA oracle price: 100 BUSD Collateral requirement to mint 1 position: 150BUSD
In this scenario the minter needs to have 150 BUSD as collateral to mint a new tAsset

T1

tAssetA swap price: 100 BUSD tAssetA oracle price: 200 BUSD Collateral requirement to mint 1 position: 300BUSD
When the oracle price moves up the minter will need 300 BUSD to keep the position, this will reduce the amount of minters willing to put down collateral. Those who can't increase their collateral will have their CDP position given for auction and anyone who buys tAssetA can redeem their collateral.
This will increase the buy pressure for tAssetA and increase the price on the swap

On a downwards price movement

When the oracle price decreased, the collateral minting requirements also decrease. This creates more incentive to mint and trade agains the swap price. Let's see an example.

T0

tAssetA swap price: 200 BUSD tAssetA oracle price: 200 BUSD Collateral requirement to mint 1 position: 300BUSD
In this scenario the minter needs to have 300 BUSD as collateral to mint a new tAsset

T1

tAssetA swap price: 200 BUSD tAssetA oracle price: 100 BUSD Collateral requirement to mint 1 position: 150BUSD
Last modified 5mo ago