> For the complete documentation index, see [llms.txt](https://fatfi.gitbook.io/fatfi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://fatfi.gitbook.io/fatfi/fat-algorithm-stablecoin/stabilization-mechanism.md).

# Stabilization Mechanism

### **When** **Fatfi** **Cash is below $1**

When Fatfi Cash is traded below $1, users will be able to purchase Fatfi Bonds at a certain discount to establish the price stability of Fatfi Cash, with the expectation of future profits upon redemption.

Each bond promises the holder exactly 1 Fatfi at some point in the future under certain conditions. Whenever a user purchases Fatfi Cash, it is burned, causing **a decrease in the circulating cash supply**. Bonds do not have interest payouts, nor do they have maturity or expiration dates. Rather, they can be redeemed on a 1:1 ratio with Fatfi Cash when the price rises above $1.

Purchased bonds can be redeemed on a 1:1 ratio with cash only when the oracle price of cash is above $1. This prevents bondholders from cutting their losses on redemptions and creating unnecessary increases in supply.

### **When Fatfi Cash exceeds $1**

When the price of Fatfi Cash exceeds $1, the contract primarily allows **bond redemptions** to bond redeemers. Even after the bonds are redeemed, if the price of Fatfi Cash is traded above the price of $1, an increase in the demand of Fatfi Cash results in new Fatfi Cash tokens being minted and distributed to **Fatfi Share** holders.

For instance, let’s assume that the price of Fatfi Cash exceeds $1 even after bond redemption. In this case, the Treasury contract mints new Fatfi Cash seigniorage into existence. This seigniorage is given to the **Boardroom**, where users can stake Fatfi Shares and earn daily seigniorage based on the price of Fatfi Cash.


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