Protocol Design

The Taichi Protocol applies a method called "direct incentive", which motivates both stablecoin trading and stablecoin application, using rewards and penalties to essentially anchor the price. In general, other exchanges and secondary markets can make arbitrage through this trading pair, helping to maintain a pegged price throughout the ecosystem. The direct incentive model itself has similar problems with other non-collateralized stablecoins. First, there is no liquidity guarantee, and second, there is no collateral to support the whole system. To solve this problem, the TAI Protocol combines the direct incentive model with the liquidity support protocol PCV to ensure that the protocol can construct a successful stablecoin.