6.2 Prevention on Large Funds Manipulation

Large funds may manipulate AIX prices to profit from Coinhour trades. To mitigate risks, the following mechanisms are implemented:

• 24-hour Time-Weighted Average Price (TWAP) is used to set the exchange price for Coinhour to AIX

• Example: If AIX price is pumped to 1.5 RMB, but TWAP is 1.1 RMB, users will exchange 1 Coinhour for AIX worth 1.1 RMB, to reducing arbitrage space.

TWAP role in Coinhour mechanism

• In the AIX ecosystem, Coinhour is an algorithmic stablecoin pegged to 1 RMB, automatically minted at 1 per hour, with 50% burned on transfer.

• Users can exchange Coinhour for AIX (base token) or use AIX to exchange for Coinhour for consumption. To prevent large funds from profiting through short-term AIX price manipulation, the exchange price for Coinhour to AIX is based on the past 24-hour AIX TWAP, not the real-time market price.

How Exchange Mechanism works?

• Coinhour to AIX: When Coinhour price is below 1 RMB (e.g., 0.95 RMB), users exchange 1 Coinhour for AIX worth 1 RMB (based on TWAP) and sell AIX on DEX for profit, pushing up Coinhour price.

• AIX to Coinhour: When Coinhour price is above 1 RMB (e.g., 1.05 RMB), users exchange AIX worth 1 RMB (based on TWAP) for 1 Coinhour, used for consumption or sold on DEX for profit, pulling down Coinhour price.

• Automatic Minting Context: Automatic minting of 1 Coinhour per hour increases supply; TWAP ensures stable exchange prices and prevents manipulation.

Example Explanation: AIX Price Pumped to 1.5 RMB, TWAP at 1.02 RMB Scenario:

• Assume normal AIX price is 1 RMB, but a large fund massively buys AIX in a short time (e.g., 1 hour), pushing the price to 1.5 RMB. • Past 24-hour AIX price samples:

• First 23 hours: AIX price stable at 1 RMB (23 sample points).

• Last 1 hour: AIX price pumped to 1.5 RMB (1 sample point).

TWAP Calculation:

• TWAP = (23 × 1 RMB + 1 × 1.5 RMB) / 24 = (23 + 1.5) / 24 ≈ 1.02 RMB.

• Despite real-time price at 1.5 RMB, TWAP remains close to 1 RMB, only 1.02 RMB.

Exchange Process:

• When users exchange 1 Coinhour for AIX, the system uses TWAP (1.02 RMB), providing AIX worth 1.02 RMB, not based on real-time 1.5 RMB AIX.

• Similarly, users exchanging AIX worth 1 RMB (based on TWAP ≈ 1.02 RMB) for 1 Coinhour actually pay about 0.98 AIX (1 ÷ 1.02 ≈ 0.98).

• Result: Exchange price stays close to normal level (1 RMB), not the manipulated high price (1.5 RMB).

Why Is This Mechanism Important?

• Preventing System Overdraw: Automatic minting generates 1 Coinhour per hour, increasing supply pressure. TWAP prevents large funds from exploiting short-term price fluctuations to exchange large amounts of Coinhour, reducing the risk of rapid reserve depletion.

• Incentivizing Consumption: When Coinhour price is above 1 yuan (e.g., 1.05 yuan), users exchange with TWAP (1.02 yuan) for Coinhour for consumption, enjoying a "discount" effect (Coinhour worth 1.05 yuan market value for only about 0.98 AIX), promoting circulation within the ecosystem.

• Enhancing Stability: TWAP smooths price fluctuations, ensuring Coinhour pegs to 1 RMB and reducing run and manipulation risks.

• Implementation: TWAP can obtain 24-hour price data for the AIX-Coinhour pair via oracles like Chainlink, with smart contracts automatically calculating exchange ratios.

• Dynamic Adjustment: If market volatility is high, shorten the TWAP window (e.g., 12 hours) or combine multiple oracles to balance sensitivity and stability.

• Synergy with Automatic Minting: Automatic minting increases Coinhour supply; TWAP ensures exchange prices are unaffected by short-term manipulation, combined with 50% burn mechanism and collateral pool to maintain price stability.