Price Stability & Depeg Analysis

Intro

It's not just the blockchain itself; stablecoins also face a trilemma in design: it's impossible to achieve price stability, capital efficiency, and decentralization simultaneously.

USDC / USDT offers the best market stability and capital efficiency but at the expense of decentralization.

Algorithmic stablecoins offer good decentralization and capital efficiency (some even have a CR < 100%) but lack the primary price stability essential for stablecoins.

Stablecoins that utilize over-collateralized debt positions (CDPs) present a compelling solution. They offer a balance, reducing centralization on the decentralization spectrum and providing a more robust and resilient use case.

It's important to note that these three characteristics are not binary but are positioned on a spectrum. Even if some centralized stablecoins / RWA assets are accepted as collateral, CDPs inherently have better decentralization properties (sacrificing some decentralization for a broader use case and greater resilience). Because of the instant liquidation mechanisms, BUCK has higher capital efficiency in the market. The following will analyze price stability and explain how Bucket Protocol manages depeg risks effectively.

General Depeg Scenario Analysis

Depeg can be divided into upward and downward depeg, yes, a price greater than one dollar should also be considered a depeg, the following will discuss these separately.