# 💧  Private Liquidity Pool

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### Private Liquidity Pool (PLP)

The Private Liquidity Pool (PLP) is a pivotal component of The Fedz ecosystem, designed to ensure the stability of the FUSD token, particularly during periods of low demand or market selloffs. Operating alongside the public liquidity pool, the PLP contains the same tokens but is intentionally maintained as a fractional reserve with lower liquidity.<br>

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### PLP (Contract Address)

[https://app.uniswap.org/explore/pools/arbitrum/0xe2d084a729df207afea549782ed1b9b2054244c3f70dc](https://app.uniswap.org/explore/pools/arbitrum/0xe2d084a729df207afea549782ed1b9b2054244c3f70dcb27eb3f766063d8d9b7)

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### Hook Address

0x986522646bF8F57d3b28C5808edE9B1E5ccA0ac0

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### **Purpose and Design**

The primary objective of the PLP is to bolster FUSD stability by creating a controlled environment for liquidity management. By restricting access and maintaining lower liquidity, The Fedz can mitigate market fluctuations more effectively, ensuring a steadier price for FUSD.

The PLP achieves its purpose through **restriction rules** that limit access to capital, underscoring and reinforcing the long-term commitment of PLP operators and liquidity providers (LPs).

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### **Restricted Access and Repetitive Rounds**

Access to the PLP is exclusive to holders of The Fedz NFTs, in contrast to the public pool, which offers permissionless access similar to traditional liquidity pools. This exclusivity enables strategic liquidity management, ensuring that participants align with the ecosystem's long-term goals.

From inception, FUSD is accessible to NFT holders through a system of **repetitive rounds**, which function as a lighter but more sophisticated alternative to capital locks such as vesting or farming. These restrictions serve a similar purpose: fostering long-term commitment and ecosystem stability.

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### **Crisis Management**

In crisis scenarios, such as when the FUSD token de-pegs in the public pool, specific functionalities in the PLP are deliberately restricted. For instance:

* **Swaps between FUSD and USDT are disabled** to prevent mass selloffs.
* **Liquidity withdrawals are temporarily restricted** to preserve the pool’s stability.

This design ensures the PLP remains resilient, supporting the broader system even under stress.

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### **Market Dynamics**

During a crisis, two distinct prices for FUSD may emerge:

1. A lower price in the public pool.
2. A pegged price maintained in the private pool.

This deliberate market distortion creates an opportunity for long-term profit. Although the peg may temporarily break in the public pool, The Fedz NFT holders can profit by adding liquidity to the system and capitalizing on the eventual recovery. While pure arbitrage (e.g., swapping FUSD in the public pool) is restricted, this design encourages strategic participation aligned with the system's recovery and health.

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### **Psychological Effect and Transparency**

The visibility of the PLP maintaining the pegged price has a **positive psychological effect** on the broader market. By showcasing a "recovered" price and demonstrating liquidity backing in the private pool, public market participants gain confidence in the system’s ability to stabilize. This transparency reassures users and encourages participation, even when public pool prices fluctuate.

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### **Support and Incentives**

To further stabilize the system, The Fedz clearinghouse plays an active role by incentivizing liquidity additions with external capital. These incentives may come from:

* **External reserves** managed by The Fedz.
* **Taxes** implemented through governance if necessary.

These measures ensure that liquidity is consistently available, maintaining the peg and supporting the ecosystem during periods of volatility.
