• Tokens
  • Price Stability

Price Stability Mechanism

Sikka Protocol uses a rebase mechanism to keep the market price of 1 SIKKA equal to 1 US Dollar. When experiencing disruption, and SIKKA’s market price not perfectly matching the US Dollar, SIKKA rebalances:

  • When SIKKA reaches $1, the supply of SIKKA is limited. This way:
    • Borrowers are motivated to purchase SIKKA from the market to repay the loan since it is at a discount.
    • Sikka will raise SIKKA borrowing interest to reduce SIKKA borrowing demand, which will improve SIKKA farming rewards.
  • If SIKKA exceeds $1, the supply of SIKKA is expanded. This way:
    • Borrowers are driven to borrow more SIKKA to sell for other assets since SIKKA is at a premium.
    • Sikka will cut SIKKA farming benefits by lowering SIKKA borrowing interest to lessen demand for SIKKA farming.