OUSD DEX AMO
The Splash DEX AMO is a core component of the OUSD stablecoin system. Its functionality is threefold:
Maintaining a stable peg for OUSD
Enabling users to exit their OUSD positions
Generating yield for sOUSD holders
OUSD Peg Protection
Peg Stability (0.99–1.01 Range)
To ensure OUSD consistently holds its target price, the DEX AMO buys OUSD with stablecoin reserves or mints new OUSD to sell in the open market. As users trade OUSD in the pool, the DEX AMO’s mechanisms automatically respond to price fluctuations.
When OUSD Trades Below the Target Price
The system uses stablecoin reserves to purchase OUSD at a discount (e.g., buying slightly more than 1 OUSD for 1 reserve stablecoin).
Excess OUSD purchased is burned, effectively removing it from circulation.
Reducing OUSD supply pushes the price back up toward the peg, while also improving the system’s asset-to-liability ratio and capturing profits that benefit sOUSD holders over time.
When OUSD Trades Above the Target Price
The protocol can mint new OUSD and sell it into the pool.
This additional OUSD supply drives the price back down toward the peg.
As long as the ADA gained from selling these newly minted tokens exceeds the OUSD minted, the difference is system profit, eventually benefitting the sOUSD pool.
Liquidity Management
Periodically, the system adds and removes liquidity in the OUSD Stableswap poola to maintain the peg:
Adding Liquidity: The protocol can freely mint additional OUSD to pair with existing stablecoin reserves, creating a leveraged liquidity position.
Removing Liquidity: Over time, the system removes liquidity, burns any excess OUSD, and tallies profits. It then re-deploys these funds into the liquidity pool or other yield strategies.
Exiting the OUSD System
Users exit OUSD positions by swapping back to reserve assets on the OUSD Stableswap.
A straightforward alternative would be a flat-fee redemption mechanism, but that requires frequent governance updates and can be unfair to different position sizes.
By using a DEX-based approach, the market itself sets the cost of exiting. Small trades incur minimal price impact (and thus lower “fees”), whereas larger trades face higher slippage.
This dynamic exit mechanism:
Is fair: Larger positions pay more due to their greater impact on the pool.
Is efficient: The liquidity pool handles swaps automatically, without requiring manual fee adjustments.
Supports peg stability: OUSD sold by exiting users is absorbed in a way that maintains price equilibrium.
Generating Yield for sOUSD Holders
Beyond managing OUSD’s peg and exit liquidity, the DEX AMO contributes to the system’s yield generation. The surplus earned (e.g., from buying low or selling high, or from liquidity provision) flows to sOUSD holders, aligning with their role as the system’s risk-bearing participants. Their staked position is rewarded via:
Profit from balancing the peg (buy low/sell high scenarios)
Accumulated fees or gains from periodic liquidity provision and removal
By offering this continuous profit sharing, the AMO ensures sOUSD holders are incentivized to serve as the protocol’s financial backbone.
The Splash DEX AMO is integral to OUSD’s stability and user friendly design. It:
Dynamically defends the OUSD peg through strategic buying, minting, and liquidity management
Provides a market driven exit for OUSD holders—small or large
Generates yield for sOUSD holders, reflecting the additional risk they assume
Together, these functions help maintain a robust stablecoin ecosystem, ensuring that OUSD remains consistently pegged while rewarding those who support its stability.
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