💱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 value of UWU by enabling direct 1:1 swaps between UWU and various stablecoins, starting initially with sUSDT. It allows users to swap between UWU and these stablecoins, subject to a swap fee.

How does the Stability Module work?

The Stability Module maintains reserves of both UWU and various stablecoins. Swaps occur when a user sends an amount of one stablecoin to the Stability Module and receives an equivalent amount of another stablecoin in exchange, minus any applicable 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 stablecoin involved in the swap. The current fee arrangements are as follows:

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

  • Another Stablecoin -> 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 stablecoins at a fixed 1:1 rates with zero slippage

  • 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 UWU and sUSDT 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.

Last updated