DSD is an algorithmic stablecoin. The system goes through alternating cycles of expansion and contraction that get progressively smaller until the price stays stable at $1.
During contractions, participants are incentivized to burn their DSD to purchase coupons with a 30-day expiration date and are redeemable only when the price is above $1.
Therefore, during contraction cycles, the total DSD supply decreases.
During expansions, the system prints more DSD to reward participants for bonding their DSD and providing liquidity.
Therefore, during expansion cycles, the total DSD supply increases.
Let’s take a look at the game theory of DSD.