Risks

Axion is designed to avoid the main risk factors facing stablecoins. Chief among these are the ability of centralised administrators to arbitrarily mint tokens and the ability to remove or mismanage collateral. Both risks are eliminated in Axion through protocol-level design: minting and collateral management are fully decentralised and exclusive to the AMO.

The primary residual risk to maintaining Axion’s peg to the dollar lies in collateral selection — if a paired asset depegs, it will affect stability within its paired pool. To mitigate this, Axion will operate only with paired collateral with a strong reputation for stability, deep market liquidity, and robust security. Additionally, Axion will operate pools with multiple paired collaterals so as to reduce the impact of a single collateral asset depegging.

The secondary risk concerns the Dex pool contracts storing collateral. Contract risk is unavoidable in DeFi. Axion, however, will only operate on reputable and audited Dexes operating on contracts with a significant track record of robust security. Most Dex pool contract vulnerabilities have involved border-effects in concentrated liquidity pools, but Axion’s liquidity will be deployed across full-range pools, significantly reducing exposure to these risks.