The SERP mints DNAR to buy back SETT with the SerpAuction when SETT goes bearish. The DNAR staking rewards are increased in proportion to the burnt DNAR. This increases the value of DNAR and SETT consecutively
The SERP mints excess SETT inflation to the SettPayReserve as discounts and cashback to SettPay users. some percentage of the newly minted SETT is used to buy back DNAR with the "Serp Auctions" when SETT goes bullish.
Elasticity is a measurement term that applies to a variable’s sensitivity to a change in another variable. In most cases, this sensitivity is the difference in price relative to changes in an array of other factors. In the field of business and economics, elasticity is a reference to the degree to which individuals, consumers, or producers modify their demand. Alternatively, when the supplied amount in response to price or income changes, it is primarily a way to evaluate the change in consumer demand mainly due to a change in price. We need a blockchain with a built-in elasticity system for it’s stablecoins in order to curb inflation and volatility in the stablecoins standard of the blockchain, that’s why SERP (Setheum Elastic Reserve Protocol) is introduced. The SERP mechanism will be explained in this paper.
The Setheum Network will be economically sovereign, DNAR will be decentralized and SETT will also be decentralized unlike most stablecoins in the market. The Sett (SETT) and SettCurrencies (settUSD, settJPY, et al.) will not be backed by fiat in a centralized bank, but will rather be backed by the DNAR. The DNAR will be driven by the market and the technology behind it.
A liquidity provider can run his/her own liquidity pools after depositing tokens to be used as collateral to open margin positions, and set up their trading parameters such as spread, lot size and leverage ratio that they support, as well as which trading pairs they would like to trade against with the traders.
SetheumDEX (Built-in DEX) protocol supports coexistence of multiple liquidity pools, and traders are free to choose which liquidity pool to trade against with.
To trade in a liquidity pool, a trader needs to deposit his/her tokens into the pool first. Traders can choose to top up their account anytime.
Liquidity Pools could be incentivized. Check Incentives for more details.