If the price of the Incognito StableCoin is above 1$,
then there is arbitrage opportunity
People can exchange by putting USDC, USDT, or DAI into the vault, in return they get minted Incognito StableCoin.
They can then take this Incognito StableCoin and sell it in the pDex for profit, bringing the price back down to 1$
If the price of the Incognito StableCoin is below 1$,
then there is arbitrage opportunity and the Vault opens
People can exchange the Incognito Stablecoin for USDC, USDT, or DAI from the vault.
This will make people buy the Incognito StableCoin from the market with PRV, bringing the price back up to 1$
If for some reason, the Price of USDC is not = 1$,
If for some reason, the Price of USDT is not = 1$,
If for some reason, the Price of DAI is not = 1$,
Then the rate to convert to Incognito Stablecoin, by means of vault, changes.
The price of Incognito StableCoin stays at 1$, regardless of price devaluation in the Vault, as long as it always has enough to bring the AMM’s back to 1$.
The StableCoin stays stable not on backing, but by the market. And it is valuable because you can always trade it on the pDex for PRV, which means any crypto.
As the vault gets bigger, that means over time, the liquidity pools for the Incognito StableCoin get bigger, there is less of a need to open up the vault all the time.
The money in the vault is being used to provide one sided liquidity anyways, so it’s technically not a “backing”, the earnings are used to increase the liquidity in the Incognito StableCoin.
If market price is always 1$, and is incetivized to always be 1$, then it is in fact a StableCoin.