Detailed Instructions

Deploy a real-time data pipeline that ingests on-chain and off-chain metrics to calculate the peg deviation. This is the percentage difference between the stablecoin's market price and its target peg (e.g., $1.00). A deviation beyond a defined threshold, such as ±1.5%, should trigger an alert.

• Sub-step 1: Configure Data Sources: Connect to decentralized exchange (DEX) APIs like Uniswap V3 to fetch real-time price feeds (e.g., USDC/ETH pool). Use Chainlink oracles for off-chain reference rates.
• Sub-step 2: Calculate Deviation: Implement a script that computes the deviation every block. For example: peg_deviation = ((market_price - target_peg) / target_peg) * 100.
• Sub-step 3: Set Alert Rules: Configure PagerDuty or a custom webhook to notify the defense team via SMS/email when abs(peg_deviation) > 1.5 for more than 5 consecutive minutes.

Tip: Consider implementing a multi-oracle system to prevent manipulation of a single data source. Use a median price from at least three reputable oracles.

Detailed Instructions

Conduct a deep liquidity analysis of primary trading venues. The goal is to understand the slippage curve and identify potential pressure points. A shallow pool with high concentration can be destabilized by a single large swap.

• Sub-step 1: Map Key Pools: Identify the top 5 DEX pools by Total Value Locked (TVL) for your stablecoin pair (e.g., USDT/DAI on Curve Finance). Use subgraph queries or direct contract calls to pool addresses like 0xbEbc44782C7dB0a1A60Cb6fe97d0b483032FF1C7.
• Sub-step 2: Profile Whale Wallets: Use blockchain explorers (Etherscan) and analytics platforms (Nansen) to track wallets holding >1% of the stablecoin supply. Monitor their transaction history for patterns of accumulation or dumping.
• Sub-step 3: Calculate Slippage Impact: Simulate the price impact of a hypothetical $50M sell order using the pool's bonding curve. A result showing >2% price impact indicates fragile liquidity.

Tip: Automate this analysis using a service like The Graph to run periodic queries and flag pools where TVL drops by more than 20% in 24 hours.

Detailed Instructions

When the peg deviates, the first line of defense is to incentivize arbitrage. This involves making it profitable for third parties to buy the undervalued asset or sell the overvalued one, driving the price back to parity.

• Sub-step 1: Adjust Mint/Redeem Fees: If the stablecoin is trading at $0.98 (undervalued), temporarily reduce the minting fee from 0.1% to 0.0% via a governance proposal or admin function call: protocol.setMintFee(0). This allows arbitrageurs to mint new tokens cheaply and sell them on the open market for a risk-free profit.
• Sub-step 2: Deploy Liquidity Mining Rewards: Directly incentivize liquidity provision in the depegged pair. Create a 48-hour LM program on a DEX like Balancer, offering 50,000 governance tokens as rewards for providing STABLE/DAI liquidity.
• Sub-step 3: Facilitate Cross-Chain Arbitrage: If the depeg is isolated to one chain (e.g., Avalanche), increase the capacity of the canonical bridge to allow cheaper movement of the stablecoin from Ethereum, where it may still be at peg.

Tip: Have pre-approved, parameterized smart contracts (e.g., a CrisisArbIncentivizer.sol) ready to deploy instantly via a multi-sig transaction to reduce reaction time.

Detailed Instructions

If arbitrage incentives fail, the protocol must conduct direct market operations (DMO). This involves using the protocol-owned treasury to buy or sell the stablecoin on the open market, acting as a buyer or seller of last resort.

• Sub-step 1: Authorize Treasury Spend: Execute a multi-sig transaction (e.g., 5-of-9 signers) to approve the use of up to $20M from the treasury's USDC holdings for market operations.
• Sub-step 2: Execute Strategic Buys/Sells: If the stablecoin is at $0.97, program a smart contract to place a series of large buy orders on a DEX aggregator like 1inch. Use a limit order to buy 5M tokens at a price not exceeding $0.975, gradually lifting the price.

codeCopy
// Example snippet for a buy order via 1inch AggregationRouterV5
bytes memory data = abi.encodeWithSelector(
    IAggregationRouterV5.swap.selector,
    executor, // address
    desc, // SwapDescription struct with amount, srcToken, dstToken
    "0x", // permit data
    callData // encoded call data for the swap
);
(bool success, ) = ONE_INCH_ROUTER.call{value: msg.value}(data);

• Sub-step 3: Coordinate with Market Makers: Engage pre-vetted institutional market makers via OTC desks to absorb large sell-side pressure without causing further slippage on public venues.

Tip: Always maintain a "war chest" of highly liquid assets (e.g., ETH, stables on multiple chains) specifically earmarked for DMO to avoid liquidating core protocol reserves.

Detailed Instructions

After the peg is restored, conduct a thorough post-mortem analysis. The goal is to identify the root cause, measure the effectiveness of the response, and tune system parameters to prevent or better handle future events.

• Sub-step 1: Reconstruct the Timeline: Create a minute-by-minute ledger of the depeg event, correlating on-chain transactions (large swaps, mint/burns), oracle updates, and defense actions. Tools like Dune Analytics dashboards are invaluable here.
• Sub-step 2: Analyze Cost Efficiency: Calculate the total cost of defense, including arbitrage incentives paid and treasury funds spent in DMO. Compare this to the theoretical cost of doing nothing (the peg deviation integral over time).
• Sub-step 3: Propose Parameter Updates: Based on findings, submit governance proposals to adjust key parameters. Examples include lowering the deviation alert threshold from 1.5% to 1.2%, increasing the minimum collateral ratio for minting from 110% to 120%, or allocating a larger percentage of protocol fees to the stabilization fund.

Tip: Publish a transparent post-mortem report for the community. This builds trust and allows other protocols to learn from the incident, strengthening the entire ecosystem's defenses.