Algorithmic stability mechanism

LynkCoDAO's algorithmic stability mechanism is the core technical support for its realization of "value anchoring and system stability". By fusing the three logics of "elastic supply regulation, diversified mortgages, and community consensus intervention", a dynamic balance system that can not only resist market fluctuations, but also adapt to complex environments is constructed. This mechanism does not act in isolation on a single token, but covers the main coin LNK and the stablecoin USO at the same time. Through dual-currency coordination, it realizes "the stability and elasticity of the overall ecosystem" and completely gets rid of the dilemma of "mechanical adjustment failure" or "single mortgage risk concentration" of traditional algorithmic stablecoins.

LynkCoDAO's stability philosophy is to "build layers in turbulence" - to transform market volatility into ecological potential energy through a dual-currency synergistic fluid model, which core satisfies the on-chain modified Navier-Stokes equation:

(Where v < b0 > v For the value flow rate, p < B1 > p For price pressure, g consensus < B2 > g Consensus is an attractive force)

Design concept: from "mechanical anchoring" to "consensus-driven dynamic balance"

Traditional algorithmic stablecoins (such as OlympusDAO's OHM) rely on the mechanical logic of "automatic trigger adjustment of the deviation between the market price and the bottom price", and lack the ability to respond to market sentiment and community consensus; while single-asset stablecoins (such as MakerDAO's DAI) rely on centralized assets such as USDC, there is a hidden danger of "systemic risk transmission".

LynkCoDAO's algorithmic stability mechanism proposes a new concept: stability is not "statically anchored to a certain price", but "dynamically balanced within a consensus framework". Its core logic is:

• Price stability requires a combination of "algorithmic automatic adjustment" and "DAO consensus intervention" to avoid the rigidity of purely mechanical adjustment;

• Risk diversification relies on "diversified asset pools" rather than a single collateral, and protects against black swans through dynamic weight allocation;

• System stabilization requires the establishment of a dual insurance of "deflation incentive + reserve buffer", so that market forces and agreement mechanisms form a positive cycle.

Elastic Supply and Price Stability Mechanism of LNK

As the main currency, LNK's price fluctuates around the "community consensus price", and the algorithmic stability mechanism achieves price anchoring through "elastic supply adjustment + bond destruction drive", including:

①　Trigger Logic Based on DAO Consensus Anchor Price

The price adjustment of LNK is not unilaterally determined by the system, but is based on the "community consensus price" (which is set by community voting and dynamically adjusted). When the market price deviates from the consensus price by a certain range (± 10%), the corresponding adjustment operation is triggered:

Market rise (market price > 1.1 × consensus price): The agreement automatically starts "supply expansion" - the LNK in the selling reserve pool is exchanged for USDT, 50% of which is used to increase the LNK/USDT liquidity pool and permanently lock (destroy LP Tokens), and the remaining 50% is injected into the national treasury reserve. This operation not only suppresses the rapid rise in prices by increasing the liquidity, but also improves the market depth by locking the LP, providing a buffer for subsequent pullbacks;

Market decline (market price < 0.9 × consensus price): The agreement initiates a "supply contraction" - using the state treasury USDT to buy back LNK at market price, reducing the liquidity to contain selling pressure. If the reserve LNK has been sold out, the agreement can replenish the reserve by minting new LNK through the USDT treasury, but the amount of minting must be approved by the community proposal (to avoid excessive inflation);

No significant deviation (0.9 × consensus price ≤ market price ≤ 1.1 × consensus price): The system maintains the status quo and guides the market supply and demand balance only through the conventional pledge reward mechanism (Rebase every 12 hours).

Market state	governing equation	on-chain implementation
rising turbulence	∇⋅v⃗>ξ∇⋅v>ξ	sell LNK → 50%lock LP → Increase viscosity coefficient μ
down vortex	∇×v⃗>ζ∇×v>ζ	USDT repurchase→ Inject kinetic energy12ρv221​ρv2
Laminar steady state	∂v⃗∂t=0∂t∂v​=0	Rebase reward adjustment density ρ

②　Bond Destruction Mechanism: A Deflation-Driven Positive Price Cycle

In order to strengthen the price elasticity of LNK, LynkCoDAO innovatively designed a "bond destruction mechanism", which deeply binds user behavior to deflationary incentives:

Users can exchange LNK bonds through USDT, and the system automatically destroys 20% of the exchanged LNK during the exchange process (for example, when exchanging 100 LNK, only 80 LNK is actually released, and 20 LNK is permanently destroyed);

Destruction directly reduces the total amount of LNK circulation, while the proportion of USDT in the LP pool increases, driving up the price naturally.

Users can get "discount price LNK" (5% -15% lower than the market price) through bond exchange, and the discount range is dynamically adjusted with the market heat (the discount in the rising cycle is reduced, and the discount in the falling cycle is expanded), which not only attracts customer engagement and destroys it, but also avoids the impact of excessive arbitrage on the market.

③　User exchange bond triggers: ④　Community consensus dynamic intervention：

Unlike OlympusDAO V3's "fully automated" regulation logic, LynkCoDAO allows the community to intervene in stabilization mechanisms through governance to enhance system adaptability.

When there is an extreme market situation (such as a black swan event that causes the price to deviate from the consensus price by more than 30%), the community can urgently propose to adjust the "trigger threshold" (such as temporarily raising the 1.1 × consensus price to 1.2 ×) to avoid overreaction of the adjustment mechanism;

If the long-term price fluctuates in a narrow range around the consensus price (e.g. volatility < 5% within 90 days), the community can propose to "shrink the price range" (e.g. ± 5%) to improve the efficiency of capital utilization;

Modifications to all regulatory parameters must be voted on by LNK holders to ensure that the intervention is in line with the consensus of the majority, rather than the subjective decision of the minority.

Definition, Ecological Reynolds Number: Re=ρvLμRe=μρvL​

• when(Turbulence): Community votes to widen price range

• when (Hysteretic state): Contraction interval to improve efficiency