Rebalancing

⚖️ mStable is designed as a dynamic system where bAssets can rebalance according to new market conditions or information

Governance controls the addition/removal of bAssets and sets their max weights. Rebalancing occurs when Governance chooses to reduce the max weight of a bAsset below its current weighting.

Secondly, a rebalance occurs when a bAsset is deemed unfit for inclusion. In this case, Governance can purge that bAsset entirely.

Standard Rebalance

Rebalancing occurs when:

  • A bAsset's max weight is lowered by Governance.

  • That bAsset's weighting is now over its new max weighting.

The rebalancing mechanism allows Forging demand to do the heavy lifting:

  • Minting validity remains the same.

  • This means that if we lower the max weighting of a bAsset below its current collateral level, minting is temporary disabled with this bAsset until it is below its target (either through redemption of said bAsset or the lowering of its collateral level through minting of other bAssets)

  • Constraints are imposed on redemption. For example, if a token now exceeds its max weight, redemption is only valid on that token. This forces the over-weighted bAssets to be redeemed first, and only once that asset is under its new weighting can normal redemption occur again

Adding bAssets

Governance has the power to add bAssets to a mAsset contract.

As it is unlikely that a bAsset will reach its max weight immediately following this decision, it should not ipso facto lead to a rebalance. Note that there is no minimum bAsset weight.

Removing bAssets

The removal of a bAsset is deemed complete when its collateral level and max weight = 0. See Expedited Rebalance below.

Expedited Rebalance

It may be deemed necessary by Governors to expedite an adjustment and ultimately remove a bAsset entirely. This will be possible through liquidating the given bAsset through a two phased auction mechanism described in Re-collateralisation.