Inverse Finance

DOLA Price Stability

How Is DOLA's Supply And Peg Maintained?

DOLA's value is a result of supply and demand in the open market, primarily determined on decentralized exchanges such as Curve, Balancer, Velodrome and others.
As DOLA is debt-backed and not collateralized by locked-up tokens like Maker’s DAI, it’s best to look at the DOLA liquidity pools and add assets and liabilities from Frontier and other lending markets when calculating total supply.
Inverse Finance DAO have voted to delegate peg maintenance to the Treasury Working Group and the Risk Working Group who maintains the DOLA peg using the following methods:

DOLA Lending Supply

If DOLA’s market price goes above $1, there is more demand than there is supply in the open market. To counteract this, Inverse Finance will mint more DOLA into existence on the ‘Supply’ side of partnering lending markets to become available for borrowing.
An increase in lending supply causes the variable interest rate for borrowing DOLA on that lending market to decrease. As DOLA becomes cheaper to borrow, more DOLA gets borrowed and the circulating supply in the market increases.
If DOLA’s peg falls below $1, then the opposite is done, meaning DOLA on the supply side of lending markets is retracted and ‘burned’.
A decrease in lending supply causes the borrowing interest rate to increase, which leads people to buy back DOLA to pay off their loans. As DOLA becomes cheaper to borrow, more DOLA gets borrowed and the circulating supply in the market increases. This additional buy-pressure in the market returns the value of DOLA back to $1.
These increases and decreases in supply continue until the market reaches equilibrium (where the supply of DOLA equals the demand for DOLA), which Inverse Finance aims to achieve at $1.

DOLA Liquidity Supply

As DOLA liquidity pools become underweighted in DOLA terms, Feds can supply DOLA to the pool which provides Inverse Finance both with the revenue generated from the deposit and the ability to make significant DOLA supply contractions instantly.
DOLA burned from liquidity pools will directly impact the balance of assets in the pools and therefore have an immediate effect on the DOLA peg.
Inverse Finance, through the DOLA Fed, maintains the flexibility to adjust borrowing rates across one or even all partner lending markets in order to optimize supply and demand for DOLA and to maintain its USD peg.


The Stabilizer can also be used to arbitrage away price differentials if the peg of DOLA varies from its $1.00 USD peg, guaranteeing an exchange rate of 1 DAI = 0.996 DOLA, or 1 DOLA = 0.996 DAI (provided there is DAI liquidity in the Stabilizer.