Liquidity Management

One of the benefits of the previous iterations of UXD as a delta-neutral stablecoin was the ability to redeem 1 UXD for 1 USD of assets at any time. As UXD is no longer simply backed by a delta-neutral position on a decentralized derivatives exchange, a more complex liquidity management strategy is required to ensure a stable peg.

This strategy is still under development but philosophically, UXD Protocol is looking to develop a strategy that:

(i) Is able to handle "normal" withdrawals/redemptions with very high certainty

(ii) Is able to handle "abnormal" withdrawals/redemptions with reasonably high certainty

(iii) Is able to handle "extreme" withdrawals/redemptions with some certainty

Functionally, this involves UXD Protocol mathematically modeling various redemption behaviour profiles, and consequently structuring its ALM strategies in accordance with this model. This is because different ALM strategies will have different liquidity profiles. For example, something like Maple Finance may have a 90 day redemption period, whereas a Delta-Neutral Position may have an atomic (within 1 block) redemption period. Therefore, a relative weighting of these strategies to meet the above redemption goals is necessary and under development.