Buyback / Mint Mechanism

Overcollateralized, Buyback and burn / Undercollateralized, Mint and Sell

Managing dUSDT under-collateralization risk with the $DEXY token

All trading fees and trader P/L goes through the dUSDT vault. When a trader loses, the losses go to the USDT vault. When a trader wins, the profit is taken from the USDT vault. Rewards that are paid in USDT are then taken from the USDT vault. USDT minting comes from the fees collected by the USDT vault.

Under-collateralized vault = minting $DEXY

When the Vault pays winning trades, it may happen that there is less USDT in the vault than liquidity deposited, in this case, it is under-collateralized and it’ll be refilled by minting and selling $DEXY OTC at a fixed price.

Once $DEXY is minted and available on the OTC, the USDT used to purchase it goes into the dUSDT vault. The buyer has the advantage of not paying trading or slippage fees, limited at 0.05% of the $DEXY total supply every 24 hours (18.25% per year).

Over-collateralized vault = burning $DEXY

If there is more USDT in the vault than liquidity providers have deposited , the vault is "over-collateralized". During periods when dUSDT vault is over-collateralized, a percentage of ALL trading losses go into a pool that can be used by anyone to sell their $DEXY tokens via OTC.

The $DEXY that is purchased by the vault will be burned, reducing the overall supply.

This mechanism automatically adjusts collateralization ratio, while creating deflationary pressure on the supply.

There isn’t a protocol bot market buying/selling, so traders and bots cannot front-run the mint/burn price action, because there is not price action on OTC trades.