Minting and Burning
This reviews the mechanics and scenarios that involve minting and burning ARTH
ARTHis minted whenever
ETHis deposited into any of the pools, which ensures that every
ARTHminted will always have some kind of backing to ensure its stability.
ARTHis never minted without some amount of
ETHbeing deposited into the protocol.
Arbitrageurs looking to profit from the peg activity of
ARTHusing cryptocurrency collateral whenever
ARTHis trading above its target price. The extra
ARTHthat is minted is sold in the open market. A bet is being made by arbitrageurs that
ARTHwill fall back to its peg and will look to sell the newly minted
ARTHwhenever it's above its peg to realize a profit. This is done by opening a loan and minting
ARTHis burnt whenever the underlying collateral is redeemed or during the closure of a loan by a user.
This happens by market participants in three different scenarios:
- Whenever ARTH trades below its target price: Arbitrageurs looking to make a profit from the peg activity of
ARTHfor its underlying cryptocurrency collateral whenever it is trading below its target price. If
ARTHtrades at 1.9$ and its target price is supposed to be 2$, then
ARTHis bought out from the open market to make redemptions from the protocol at 2$ for a profit.
- Whenever a loan is closed or liquidated: Whenever a loan is closed or liquidated, the
ARTHthat was minted against that loan is burnt off and the collateral against that loan is given back or distributed to the stability pool depositors.
- Whenever a loan is redeemed: Users who redeem
ARTHfor a cryptocurrency collateral will be able to burn their