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Economics

One primary benefit of an algorithmic stablecoin protocol is the ability to dynamically adjust supply based on fluctuations in demand. An increase in demand for any L-asset will exert upward pressure on the price of the L-asset. In order to keep the L-asset's price stable, arbitrageurs can purchase LRB on exchanges to swap for the desired L-asset and sell, likely leading to an increase in the price of LRB.

The opposite is also true - a decrease in demand for any L-asset is counteracted by a decrease in demand for LRB, likely leading to a decrease in the price of LRB. Although this downward pressure can easily be absorbed during normal operation, a drastic event such as a market crash may create a negative feedback loop on LRB prices as the downward pressure on L-assets increase the downward pressure on LRB and vice versa.

In order to reduce the risk of a negative feedback loop on LRB prices, Lyrebird allows LRB holders to stake their LRB with an unstaking period of 30 days. As compensation for the risk that they absorb, LRB stakers enjoy benefits including periodic distribution of all swap spread fees and voting.