Back to Home

Stability Mechanisms

How does GUILD stay stable? Through multiple layers of defense—like a medieval castle with walls, moats, and a keep. If one defense fails, others kick in.

Three Layers of Defense

1

The Settlement Pledge

Trust Floor

The first line of defense. A hard-coded guarantee that you can always exchange 1 GUILD for 1 crvUSD. This isn't a promise from a company—it's written into the smart contract itself.

How it works: The protocol maintains a pool of crvUSD specifically for redemptions. When you want to exit, you simply exchange your GUILD for crvUSD from this pool.

2

The Redirect Variable

Self-Healing Buffer

The second line of defense. An automatic system that detects when too many people are trying to exit and responds by redirecting more revenue to refill the Settlement Pledge.

How it works: If withdrawal pressure increases, the Redirect Variable automatically diverts a larger share of the protocol's revenue toward the Settlement Pledge contract—like an immune system sending more white blood cells to fight an infection.

3

Protocol-Controlled Vault

Sovereign Backstop

The ultimate backstop. A growing reserve of high-quality assets (primarily ETH) that the protocol fully controls. This is the foundation of GUILD's long-term intrinsic value.

How it works: A fixed portion of all revenue is continuously converted to ETH and deposited into the Vault. This reserve isn't used for day-to-day operations—it's the nuclear option, the ultimate guarantee of value.

What Happens in a Bank Run?

Let's walk through a worst-case scenario: everyone panics and tries to withdraw at once.

Panic Starts

Bad news hits. Maybe a competitor fails, maybe there's a market crash. People start rushing to exchange their GUILD for crvUSD.

Layer 1 Activates: Settlement Pledge

The first wave of redemptions is handled smoothly. People exchange GUILD for crvUSD at 1:1 from the Settlement Pledge pool. No drama, just code executing.

Layer 2 Kicks In: Redirect Variable

The system detects increased withdrawal pressure. Automatically, a larger portion of the protocol's ongoing revenue is redirected to refill the Settlement Pledge. The pool starts refilling even as people withdraw.

Layer 3 Stands Ready: The Vault

If things get really extreme, the Protocol-Controlled Vault is there as the ultimate backstop. The ETH reserves can be used to ensure everyone who wants to exit can do so.

The Outcome

Unlike algorithmic stablecoins that can enter a "death spiral," 3.Finance's layered defenses mean that panic actually accelerates the growth of the Vault. The system becomes stronger under stress, not weaker.

The Sunset Scenario

What if everything fails? 3.Finance has a pre-coded plan for a graceful shutdown.

Coded Orderly Unwind

In the absolute worst case, the protocol has a hierarchical shutdown process built into its code. This ensures that even in catastrophic failure, creditors are protected and the system unwinds predictably.

1

Halt New Activity

All new GUILD minting and asset acquisitions are stopped immediately.

2

Fund the Settlement Pledge

All treasury assets are redirected to fully fund the Settlement Pledge.

3

Honor All GUILD Claims

Every outstanding GUILD can be redeemed 1:1. GUILD holders come first.

4

Distribute Remaining Assets

Only after all GUILD claims are satisfied would any remaining assets go to 3Fi governance token holders.

Key Point: This isn't a "maybe we'll figure it out" plan. It's coded into the smart contracts from day one. The rules are set before anyone puts money in.

Learning from Past Failures

3.Finance was designed with the lessons of Terra/LUNA and other failed stablecoins in mind.

What Went Wrong with Terra

  • ✕Backed only by LUNA token, which could lose value
  • ✕Algorithm created more LUNA when UST was redeemed
  • ✕Death spiral: more redemptions → more LUNA → lower LUNA price → more panic
  • ✕No real assets backing the system

How 3.Finance Is Different

  • ✓Backed by real, productive assets (ETH, yield-bearing tokens)
  • ✓No algorithmic debt creation—only real assets
  • ✓Stress actually strengthens the system (Redirect Variable)
  • ✓Multiple independent defense layers, not just one mechanism