Why Depeg Protection?

In addition to maximizing yields through intelligent optimization and autocompounding, Voyage incorporates depeg protection, a crucial safeguard for users participating in stablecoin pools and ETH-pegged pools. The inclusion of depeg protection ensures that the protocol can automatically protect user funds from potential losses when assets deviate from their intended peg.

Stablecoins are designed to maintain a stable value, often pegged to a fiat currency like the US dollar or a commodity like gold. However, in certain market conditions, stablecoins can lose their peg (a phenomenon known as depegging), leading to significant financial risk for users. For instance, in highly volatile markets or during a liquidity crunch, stablecoins may trade below or above their pegged value. ETH-pegged pools can also experience significant fluctuations when exposed to large swings in the market.

To ensure that users’ capital is not exposed to unnecessary risk, Voyage employs a built-in depeg protection mechanism. This system automatically detects when an asset is trading off-peg and triggers a series of actions to swap these assets into more stable or liquid pools, thereby mitigating potential losses.