Liquidity & Pegging

wALGO has three mechanisms to maintain liquidity and a peg to ALGO price.

1. We manage reward emissions to keep the price of newly minted wALGOs close to the ideal blue line in the diagram. An increase in reward emissions will motivate users to mint wALGO, collect rewards, and sell wALGO, which pushes wALGO price down. If the price of wALGO falls below ALGO, reward emissions stop which reduce the incentive to mint wALGO. Arbitrageurs, knowing wALGO can be redeemed for ALGO at the end of the governance period, will buy wALGO on the market and push the price up.

2. We will maintain AMM pools where users can trade wALGO for ALGO

3. The pool allows redemption from wALGO to ALGO. This allows liquidators to sell the assets in a large and liquid ALGO market.