⚖️Price Stability Mechanisms

1. Collateralized Debt Position and Loan-to-Value (LTV) Ratio:

A Collateralized Debt Position (CDP) is a core concept in decentralized finance where users deposit their assets as collateral to borrow against them. This mechanism allows users to leverage their holdings to generate liquidity without selling their assets. Cephei Protocol utilizes this concept to offer its users a strategic way to access funds while maintaining their investment positions. Central to its CDP strategy is an over-collateralization ratio, ensuring that the stablecoins issued are always backed by assets of significantly higher value, providing a crucial safeguard against market fluctuations.

In Cephei Protocol, the Loan-to-Value (LTV) ratio is a pivotal component in the lending process, indicating the portion of the borrowed amount in relation to the total value of the collateral provided. This metric is crucial as it reflects the level of protection the loan amount has against the value of the underlying assets. As an example, for Liquid Staking Tokens (LSTs) the LTV may be 66%, so this means, that users would be able to borrow up to $66 for every $100 of collateral. Importantly, Cephei Protocol employs a dynamic approach to LTV ratios, tailoring them to the unique risk profiles of different types of assets used as collateral. This includes a range of reward-bearing tokens, with variations in LTV ratios to reflect their respective risk levels. For instance, reward-bearing tokens from lending protocols might have a higher LTV due to their distinct risk attributes.

2. Arbitrage Mechanisms:

Cephei protocol solves Peg question with the most sustainable way - make peg profitable for arbitragers. When the price of cUSD > 1$ - it is profitable to open new credit and sell cUSD for another stablecoin and this selling process would push the price of cUSD to 1$. If ptice of cUSD < 1$, then it is profitable to buy cUSD from the market to close the credits and this buiyng process would also push the price of cUSD to 1$.

3. Liquidation Mechanisms:

Liquidation is one of the most crusual mechanics for sustainability of any lendeng protocol. Cephei Protocol would able users to liquidate other users, whose Health Factor drops below 1, creating arbitrage opportunity because of the liquidation bounty. Soon Cephei will introduce soft-liquidaton mechanics. More about this you read in Liquidation mechanics and insurance

4. Insurance Pool:

Anticipating potential bad debt, Cephei will launch a Insurance Pool funded by Cephei protocol tokens and incentivized by a portion of protocol revenue. As loans increase, the pool grows, creating a financial safety net against disruptions or instances of bad debt, reinforcing platform stability and user trust.

5. Deactivatable redemptions

Redemption is a mechanism when for 1 cUSD you can always get 1$ of collateral tokens, for example 1$ in TON equivalent in exchange for 1 cUSD, and this one dollar of collateral will be taken from a position with the lowest HF (it is close to liquidation), thus securing the credit from liquidation and performing the exchange itself. But like any medicine this mechanic in large quantities is poison and kills the system, so we decided to make deactivatable redemption that will be turned on only in emergency situations (ideally never) and guaranteed to restore the peg