Arbitrage: Conclusion

Conclusion

In AionicDAO, repaying loans and liquidations work hand-in-hand to stabilize the peg of synthetic assets. Repayment reduces supply and increases demand when prices fall below the protocol value, while liquidations create immediate demand when undercollateralization occurs. The spread between the borrowing ratio and liquidation ratio further determines how often these events occur, balancing flexibility for borrowers with the need for market corrections. Together, these mechanisms ensure that synthetic asset prices remain closely pegged to their protocol-defined values, providing long-term stability and efficiency within the system.