Stabilizer Bot

Stabilizing Algorithm

Mint And Burn Mechanism

-The protocol mints (adds) or burns (removes) supply from circulation in proportion to the coin's price deviation from the $1 peg. If the coin price > $1, the protocol mints coins. If the coin price < $1, the protocol burns coins.

-Keeps the price of stable coin at targeted price and also checks every 24 hour for the volatility feature to automatically adjust the target price based on market conditions, such as the average price over a certain period or the price of a basket of other stablecoins. This can make the bot more adaptive to changing market dynamics and reduce the need for manual intervention.

Idea Behind The Bot

The basic idea behind it is to adjust the supply of the stablecoin tokens to maintain a constant price in terms of the target asset. If the price of the stablecoin rises above the target price, the protocol will increase the supply of tokens by "minting" new tokens and distributing them to holders of the stablecoin. If the price of the stablecoin falls below the target price, the protocol will decrease the supply of tokens by "burning" existing tokens, effectively removing them from circulation.

The key advantage of using a this mechanism is that it allows the stablecoin to maintain its peg to the target asset without relying on centralized reserves of the target asset. Instead, the supply of the stablecoin is dynamically adjusted based on market conditions, which can help to prevent large fluctuations in price.

Flow

Code Open Source:

// const Web3 = require('web3');
const axios = require('axios');
const dotenv = require('dotenv');

dotenv.config();
const web3 = new Web3(process.env.INFURA_API_URL); // or any other RPC endpoint

// Load the stablecoin contract and define the contract functions
const stablecoinContract = new web3.eth.Contract(contractABI, contractAddress);
const mint = stablecoinContract.methods.mint;
const burn = stablecoinContract.methods.burn;

// Define the target price and the desired exchange rate with USDT
const targetPrice = 1; // for example, $1 per stablecoin
const exchangeRate = 1; // for example, 1 stablecoin = 1 USDT

// Create a function to check the current price of your stablecoin by calling an API
async function checkPrice() {
  try {
    const response = await axios.get('https://api.coingecko.com/api/v3/simple/price?ids=stablecoin&vs_currencies=usd');
    const currentPrice = response.data.stablecoin.usd;
    return currentPrice;
  } catch (error) {
    console.error(error);
    return null;
  }
}

// Define a function to update the target price based on market conditions
async function updateTargetPrice() {
    const priceHistory = await stablecoinContract.getPastEvents('PriceUpdate', { fromBlock: 0, toBlock: 'latest' });
    const latestPrice = priceHistory[priceHistory.length - 1].returnValues.price;
    const timeThreshold = new Date().getTime() - 86400000; // 24 hours ago
    const recentPrices = priceHistory.filter(event => event.timestamp >= timeThreshold).map(event => event.returnValues.price);
    const averagePrice = recentPrices.reduce((sum, price) => sum + price, 0) / recentPrices.length;
    const volatility = Math.abs(averagePrice - latestPrice) / averagePrice;
    const trend = (latestPrice - averagePrice) / averagePrice;
  
    // Update the target price based on the market conditions
    if (volatility < 0.05) {
      // If the market is relatively stable, set the target price to the average price
      targetPrice = averagePrice;
    } else {
      // If the market is volatile, adjust the target price based on the trend
      const adjustment = Math.min(Math.abs(trend) * 0.1, 0.05) * averagePrice;
      targetPrice += trend > 0 ? adjustment : -adjustment;
    }
  }
  
  // Update the target price periodically using a timer or a cron job
  setInterval(async () => {
    await updateTargetPrice();
  }, 3600000); // every hour
  
  // Use the updated target price to calculate the difference and adjust the supply
  const difference = calculateDifference(currentPrice, targetPrice);
  if (Math.abs(difference) > 0.01) {
    await adjustSupply(difference);
  }
  

// Define a function to adjust the stablecoin supply using the mint/burn algorithm
const maxAdjustment = 0.1; // for example, limit to 10% of the total supply

// Define a function to adjust the stablecoin supply using the mint/burn algorithm
async function adjustSupply(difference) {
  const supply = await stablecoinContract.methods.totalSupply().call();
  const adjustment = Math.min(Math.abs(difference) * supply * exchangeRate, maxAdjustment * supply);
  if (difference > 0) {
    // If the price exceeds the target price, call the burn function
    await burn(adjustment).send({ from: yourAddress });
    console.log(`Burned ${adjustment} stablecoin`);
  } else if (difference < 0) {
    // If the price decreases below the target price, call the mint function
    await mint(adjustment).send({ from: yourAddress });
    console.log(`Minted ${adjustment} stablecoin`);
  }
}

// Repeat the price check and adjustment process periodically using a timer or a cron job
setInterval(async () => {
  const currentPrice = await checkPrice();
  if (currentPrice !== null) {
    const difference = calculateDifference(currentPrice, targetPrice);
    if (Math.abs(difference) > 0.01) { // or any other threshold
      await adjustSupply(difference);
    }
  }
}, 60000); // every minute