> For the complete documentation index, see [llms.txt](https://pegbreaker.gitbook.io/pegbreaker-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://pegbreaker.gitbook.io/pegbreaker-docs/platform-and-features/minting-strategy.md).

# Minting Strategy

### Introduction

This document outlines the PegBreaker minting strategy, focusing on controlled DPG issuance, liquidity management, and price stability. The strategy leverages MakerDAO borrowing to create a robust mechanism for maintaining the $1 peg and pressuring DAI's stability.

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### Controlled DPG Minting Mechanism

### Eligibility for Minting

* Users can mint DPG 1:1 against DAI **only if DAI's price is above $1** relative to USDC.
* Minting is restricted to users who utilize the **MakerDAO strategy**, borrowing DAI at the maximum rate of **150%** collateralization.

### DAI Handling

* The borrowed DAI is deposited into the PegBreaker treasury.

  \- Deposits auto-converted to USDC using the best pools on-chain (e.g., Uniswap).

  \- 90% of the USDC is added to liquidity pools.

  \- 10% of the USDC is allocated to the treasury to support price stabilization during downturns.

### User Staking and Locking

* The user's DPG is **auto-staked** and locked until the next epoch (e.g., weekly or monthly).
* Users cannot request to unstake and receive DAI back, as this would counter the protocol?s

  strategy.
* The only option for users is to **sell DPG** in the liquidity pools.

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### Key Benefits of the Strategy

* Price Stability: By requiring minting through MakerDAO, the protocol ensures that only highly

  collateralized DAI enters the system, reducing risks.
* Liquidity Support: Auto-conversion of DAI to USDC and allocation to liquidity pools strengthens

  market depth and reduces slippage for trades.
* Treasury Resilience: A portion of funds (10%) is reserved to support the DPG price during

  downturns, ensuring peg stability.
* Aligned Incentives: Users are incentivized to follow the protocols goals while reducing

  circulating supply through staking and limiting immediate sell pressure.

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### Risk Mitigation and Enforcement

* No Redemption of DAI: Users cannot redeem their DPG for DAI once minted, as this would contradict the protocols objective of pressuring DAI and maintaining DPG stability.
* Market-Driven Selling: Users must sell DPG through the protocols liquidity pools, ensuring sell pressure contributes to market dynamics.
* Controlled Minting Conditions: Minting is only allowed when DAI is above $1, ensuring that the protocol does not exacerbate price instability.
* Auto-Staking Mechanism: Auto-staking and locking mechanisms prevent sudden liquidity withdrawals, fostering long-term stability.

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### Example Scenario

* User Mints DPG: User borrows $10,000 DAI from MakerDAO at 150% collateralization and deposits it into PegBreaker.
* DAI Conversion:

  \- The $10,000 DAI is auto-converted to USDC:

  \- $9,000 USDC is added to liquidity pools.

  \- $1,000 USDC is allocated to the treasury.
* User Staking:

  \- The user receives 10,000 DPG, which is auto-staked and locked until the next epoch.

  \- The user cannot unstake and redeem DAI but can sell DPG through liquidity pools if desired.

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### Conclusion

The PegBreaker minting strategy ensures sustainable DPG issuance, supports liquidity, and maintains price stability while aligning user incentives with the protocol?s goals. By leveraging MakerDAO, the strategy creates a robust mechanism to maintain the $1 peg and achieve long-term ecosystem resilience.