Federal Reserve
An explanation for the Federal Reserve System of Cripto Archi Finance’s Archi Bank.
Federal Reserve System
A bank must always have a portion of its total assets when depositors request a withdrawal. This is called the ‘Fractional Reserve System.’
When a bank fails to make the withdrawal requested by the depositor, it is called a bank run. The Federal Reserve is designed to prevent and minimize these bank runs.
It can control the amount of money at its discretion to reduce the possibility of bank runs. In other words, it can increase or decrease the amount of currency.
The Federal Reserve System of Cripto Archi Finance’s Archi Bank.
Cripto Archi Finance’s Archi Bank introduces the concept of the Federal Reserve System to prevent the bank run of Archi Bank’s Archi Dollar.
The concept of the Federal Reserve System is uses a Federal Reserve System (Fed) contract. It prevents bank runs by increasing or decreasing the deposits of Archi Bank’s Archi Dollar through the Fed contract. The Fed contract mints or burns Archi Dollars internally to increase or decrease Archi Bank’s Archi Dollar.
As Fed’s minting of Archi Dollars is intended to temporarily supply liquidity in situations such as bank runs, its special authority allows liquidity adjustments by temporarily borrowing and paying back Archi dollars without any collateral.
In general, decentralized lending protocol use utilization as a countermeasure against bank runs. The goal is to have a very high loan interest rate when utilization is high so that there is some liquidity left in the asset pool. However—bank runs may occur regardless. This occurs when the liquidity held by the depositor is smaller than the amount requested.
Generally, when a bank run occurs in a decentralized lending protocol, the borrower must pay off the loan or wait for a depositor to make additional deposits to increase the liquidity. The introduction of the Fed concept emerged as an additional alternative to solve these problems.
The reason why the Fed concept can be introduced is that Archi Dollar is a stablecoin that can be controlled by Cripto Archi Finance.
If a bank run occurs in Ether, you have to wait for the liquidity to increase beyond the withdrawal amount. This is a risk that can arise when the initial liquidity of the lending protocol is low or when excessive lending occurs.
Fed Contract
Fed contracts can only increase or decrease Archi Dollar deposits in Archi Bank. There is no problem with customer assets because actions such as transferring assets elsewhere cannot be done.
When Archi Dollars are deposited in Archi Bank through Fed, it can earn interest income because interest is generated. The use of income is subject to Governance decisions.
Increases or decreases in Fed deposits can only be requested by accounts with Governance access. It is currently the distribution contract address.
Fed Contract
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