💱Stability Module

The Stability Module is not a fundamental component of UWU Protocol. Instead, it is an additional component developed post-deployment of UWU Protocol

What is the Stability Module?

The Stability Module is a tool designed to stabilize the price of UWU by enabling direct swaps between UWU and various assets, such as highly liquid stablecoins. Users can swap UWU and these stablecoins at predefined rates, typically subject to a swap fee.

How does the Stability Module work?

The Stability Module holds reserves of UWU and various assets. Users can swap UWU for another asset, or vice versa, at predefined rates, typically subject to a swap fee. For example, if the rate between UWU and sUSDT is 1:1, users receive 1 sUSDT for every 1 UWU swapped, minus any swap fee.

This approach differs from conventional Peg Stability Modules (PSMs) because it does not mint or burn any UWU, meaning the assets held in the Stability Module's reserves do not back UWU.

What fees do I pay when swapping?

The Stability Module features a flexible fee structure that can change depending on the specific assets involved in the swap. The current fee arrangements are as follows:

• UWU -> Another Asset: A fee may be applied for each swap. For instance, currently swapping from UWU to sUSDT incurs a fee of 50bps (0.50%)

• Another Asset -> UWU: While a fee may be charged for these swaps, typically it isn't. As an example, currently swapping from sUSDT to UWU has no fee

Does the Stability Module centralize UWU Protocol?

No, it does not. The Stability Module does not centralize either UWU Protocol or UWU Cash (UWU). It lacks the authority to mint or burn tokens, and thus the assets in its reserves do not back UWU.

What are the benefits of the Stability Module?

The Stability Module presents several benefits:

• It facilitates swaps between UWU and various assets at predefined rates

• It encourages peg stabilization through frictionless arbitrage

• It generates revenue from swap fees

• It enhances market liquidity for UWU

What are the risks of the Stability Module?

The main risk associated with the Stability Module lies in smart contract vulnerabilities. If exploited, an attacker could potentially withdraw assets from the reserves.

However, since the Stability Module is an optional component that doesn't alter the core protocol, UWU Protocol would continue to be fully backed by STX and should remain unaffected in such a situation.