RBS(Range Bound Stability)

Range-Bound Stability (RBS) System Overview

The Range-Bound Stability (RBS) system is an automated price stabilization mechanism implemented by Cosmos DAO to reduce volatility and establish COS as a stable reserve currency.

• Objective: Stabilize COS’s market price around the higher of the 30-day Moving Average (MA) or the Liquid Backing Price (LBP).

• Mechanism:

  • Price Range: Sets Upper and Lower Walls/Cushions based on the 30-day MA, with a current spread of 20% for each.

    • Upper and lower walls are set based on the target price with a 20% spread.

      • Upper Wall:

        

      • Lower Wall:

      
  • Market Intervention:

    • If the price falls below the Lower Cushion/Wall, the protocol uses reserves (e.g., DAI) to buy COS, supporting the price.

    • If the price exceeds the Upper Cushion/Wall, the protocol sells new COS at a discount to increase supply and lower the price.

• Capacity:

  • Lower Wall capacity is set as a percentage of reserves (Reserve Factor).

  • Upper Wall capacity is calculated based on the Lower Wall capacity, price, and spread.

  • Capacity Calculations

    • Lower Wall Capacity: Percentage of reserves (Reserve Factor)

    

    • Upper Wall Capacity: Calculated based on lower capacity, price, and spread (estimated as value balance: lower capacity value / upper wall price)

    
• Wall Regeneration: If a wall’s capacity is exhausted, no new wall is created until the price stabilizes below the 30-day MA for a set period (X/Y epochs).

• Target Price Adjustment: If the 30-day MA falls below the Liquid Backing Price, the target price shifts to the LBP.

• DAO-Owned Liquidity (DOL): Most COS liquidity is protocol-owned, and RBS balances liquidity and reserves.

• Adjustable Range: The range of the RBS can also be adjusted through DAO governance, allowing the community to dynamically adapt the stabilization mechanism to changing market conditions.