The key to stability in unstable markets


If 1 $HAI token can redeem $100 worth of deposits, but $HAI is trading for $90, a keen investor would have immediate incentive to buy up $HAI until its price returns to equilibrium, as they can profit a free $10 per token.
Likewise, if 1 $HAI token can redeem $100 worth of deposits, but $HAI is trading for $110, then $HAI holders would be wise to sell their tokens until it returns to equilibrium. In this case, they will have received a $10 profit.


Because DIV assets are not stable, the opportunity for arbitrage will be high, which in turn helps stabilize the $HAI token representing the ratio of assets. So, while a swap between 2 assets in the DIV might require high slippage (due to high volatility), the $HAID token representing that underlying value will likely be much stabler.
The protocol relies on short term volatility for yield and long term stability for appreciation. This means that short term volatility increases LP fees, which are passed on to sDAMO stakers and LP'ers, while long term stability increases appreciation of the underlying assets, which benefit all depositors.
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