Yamato Protocol is a crypto-asset overcollateralized stable coin issuance protocol. V1 allows the issuance of CJPY (“Convertible JPY”, a Japanese Yen equivalent coin) using ETH as collateral.
CJPY serves as an ETH overcollateralized stablecoin designed to maintain a peg to the Japanese Yen. In the future, the Yamato protocol will expand to encompass various tokens as collateral, and a diverse range of fiat stablecoins will be introduced, initially including USD and EUR pegs.
The CJPY is soft-pegged by game theory to be equivalent to 1 JPY.
What is game theory (mainly Nash equilibrium)?
The idea is that each side behaves either selfishly or rationally, leading to a targeted equilibrium point (in this case, 1 JPY peg). Incentives and other motivators are needed in the dynamics that always outweigh aggressive (destructive, irrational) behavior.
The minimum collateral ratio at the time of issuance is 130%, which means that 1CJPY can always be expected to be backed by collateral equal to or greater than 1 JPY.
1CJPY can always be redeemed against collateral equivalent to 1 JPY.
Force to repeg when the price is less than 1 JPY
Demand to purchase CJPY to repay or redeem
Debt of 1 CJPY can be repaid for less than 1 JPY, which increases the demand for purchases in the market.
Since CJPY obtained for less than 1 CJPY can be exchanged for 1 JPY worth of collateral through redemption, demand for arbitrage-oriented purchases will increase.
Force to repeg when the price is over 1 JPY
Selling demand from CJPY issue in Yamato
1 CJPY borrowed can be sold in the market for 1 JPY or more and demand for arbitrage-oriented sells will increase.
