Risk Management

Some of the risk management techniques used in ELEMENT StableSwap are as follows

Withdrawal

There is a possibility of instances when some tokens suffer shortages while large liquidity providers want to withdraw their shares. In such cases, ELEMENT may not be able to satisfy the transaction needs of the user. ELEMENT will deal with this risk by informing users that they can only withdraw what the system can offer at the time. However, they can return and withdraw their balance when equilibrium is restored. Alternatively, the system will allow users to remove other assets well covered in the protocol, even if they are not the ones they provided when depositing.

Price oracle

Most protocols usually assume assets inside the pool are always pegged. While the understanding is true most of the time, sometimes, it is not the case. ELEMENT will use price oracles to monitor the price difference between tokens and reverse transactions where the price deviation between the tokens is more significant than a certain percentage.