How Does the Market Capitalization of the Governance Token Relate to the Stablecoin’s Security?
The market capitalization of the governance token represents the protocol's ability to absorb losses and maintain the peg. A larger market cap means the protocol has a bigger buffer to issue tokens and incentivize arbitrage during stress.
If the stablecoin's market cap vastly exceeds the governance token's, the system is highly vulnerable to a death spiral.
