Actively Stabilizing Collateral (ASC)

Last Updated: 2026-01-27

ASC is the Asset Liability Management (ALM) requirement that each Prime must satisfy to keep USDS near $1 during downward peg pressure. Complementary to ASC, each Prime must also maintain a Demand Absorption Buffer (DAB) to provide sell-side liquidity during upward peg pressure.

This document is the Risk Framework’s operational view of ASC/DAB (definitions, qualification rules, enforcement, and how it replaces legacy PSM-centric liquidity over time).

Definitions

Agent Collateral Portfolio

A Prime’s Collateral Portfolio is the total capital it has deployed from Sky through the Allocation System Primitive, excluding any portion held in USDS.

ASC (Actively Stabilizing Collateral)

Prime Agents must maintain at least 5% of their Collateral Portfolio in Actively Stabilizing Collateral.

ASC is the sum of:

Resting ASC (immediate buy support near the peg)
Latent ASC (convertible into resting ASC quickly)

Resting ASC (immediate buy support)

Resting ASC must provide buy support at a price of at least 0.999 USD per USDS (10 bps downside spread).

To avoid “paper liquidity”, the working implementation assumption for Laniakea is:

Resting ASC must correspond to a directly and atomically executable bid/quote (e.g., an onchain DEX position or a live CEX orderbook order/quote), or to a verifiable arrangement (including offchain market-making) that guarantees such buy support within the allowed spread.

Current calculation inputs (implementation snapshot):

USDC in LitePSM
USDC in PSM3 on Base/Arbitrum/Unichain/Optimism
Cash stablecoins in Curve paired with USDS
USDC in GUNI pools (0.01%, 0.05%)
Cash stablecoins in Uniswap paired with USDS

Latent ASC (convertible within 15 minutes)

Latent ASC consists of cash stablecoins that do not qualify as resting ASC but can be converted into resting ASC.

To qualify as latent ASC, assets must:

Be verifiable onchain or through reputable APIs/oracles
Be convertible into resting ASC within 15 minutes under normal market conditions
Convert via a fully automated process that triggers when ASC falls below specified levels

Cap: latent ASC may not exceed 25% of total ASC.

Current calculation inputs (implementation snapshot):

Cash stablecoins in Curve/Uniswap not paired with USDS
Cash stablecoins in SparkLend, Aave, Morpho
Cash stablecoins held in a Prime ALM Proxy

Demand Absorption Buffer (DAB)

Every Prime must maintain a DAB equal to 25% of its required ASC.

DAB is intended to stabilize USDS during periods of excess supply by providing sell-side liquidity. In current implementation language, DAB is “a subset of ASC” consisting of USDS that is for sale for at most 1.001 USD per USDS.

Qualifying forms may include:

USDS or DAI in PSMs
Autonomous systems that generate USDS dynamically through allocation as needed

Peg Defense Events

Trigger

A Peg Defense Event occurs when the average USDS price on LayerZero-connected DEXes falls below 0.999 USD per USDS.

Prime obligations

During a Peg Defense Event, each Prime must immediately begin buying USDS at a rate of at least:

6.25% of its ASC requirement every 6 hours

Peg defense can be performed through a combination of:

Selling other collateral for USDS, and/or
Using USDS (or newly generated USDS) as collateral to borrow other assets (e.g., USDC/USDT on Aave) and buy USDS.

Enforcement and near-term posture

In the near term:

Failures to maintain minimum ASC have no explicit penalty, but must be detected and reported (including into the settlement-cycle independent calculation).
DAB and peg-defense penalty schedules are explicitly “to be specified” in future iterations.

Separately from penalties, ASC can be supported with incentives: eligible ASC can earn an incentive tied to the spread between Base Rate and Treasury Bill Rate (paid as part of the settlement cycle).

ASC renting (ALM rental)

Each Prime has an ASC (and DAB/peg-defense) obligation proportional to the portion of the Sky Collateral Portfolio it deploys. To satisfy these obligations efficiently, Primes can trade ALM responsibilities with each other via Asset Liability Management Rental:

Renting out (being rented from): you receive payment and take over another Prime’s ASC obligation (you hold “extra” ASC for them).
Renting in (renting from others): you pay to have another Prime take over your ASC obligation (they hold ASC on your behalf).

When ALM obligations are rented, the associated obligations for ASC, DAB, and Peg Defense Events are transferred together.

Transition away from the PSM

ASC is designed to become the primary liquidity management system, replacing Sky Core’s legacy ALM mechanisms over time.

Transitional state (legacy still active):

Sky Core manages and controls the PSM while ASC infrastructure is being fully deployed and operationalized.
Control of the LitePSM is being transitioned to Grove; post-transition, Grove manages the LitePSM as an ASC asset under ALM rules.

PSM as an ASC asset (Grove operations)

In the transition period, the PSM functions as a large, simple ASC reservoir and backstop:

Grove is expected to assume operational/accounting ownership of the PSM (with Sky retaining active oversight until full ASC implementation).
Grove pays the Base Rate on assets held in the PSM; if there are no better alternatives available, Grove can use the PSM to meet ASC requirements.
USDC in the PSM is treated as uniquely capital-efficient for peg liquidity (in current terms: no capital requirement vs alternative deployments that may require risk capital).
If better ASC options exist (e.g., Uniswap/Curve positions that still qualify), Grove can reduce or empty the PSM; if ASC obligations rise materially, PSM usage can increase.
The protocol can support “ASC point” economics where other actors rent/offer ASC capacity (conceptually aligned with ALM renting).

Target state (Laniakea intent):

ASC becomes the comprehensive ALM layer across Primes.
The legacy PSM becomes an implementation detail of Grove’s liquidity operations (potentially represented as a Grove-owned Halo/Unit), rather than the protocol’s primary peg mechanism.

Where this fits in the Risk Framework

ASC/DAB constrain liquidity posture and peg-defense readiness; they are complementary to risk-capital requirements (CRR/RRC).
Concentration and portfolio-risk controls live in correlation-framework.md and the capital modules; ASC determines “how fast can we buy” during peg defense, not how much capital buffers credit/market losses.