For a synthetic RWA to be useful, its price must consistently reflect the value of the real-world asset it represents. Airway achieves this through three complementary mechanisms: market-driven arbitrage, automatic liquidation of undercollateralized positions, and concentrated liquidity rewards on Uniswap V4. No single mechanism carries the full burden — each one addresses a different pressure point, and together they form a self-reinforcing system that keeps synthetic RWA prices anchored to their real-world counterparts.Documentation Index
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Mechanism 1: Arbitrage
Arbitrage is the protocol’s first line of defense. When market activity pushes the price of a synthetic RWA away from its pegged value, profit-seeking traders naturally correct it.When the price is above the peg
When the price is above the peg
If a synthetic RWA trades above its pegged real-world value, traders can deposit collateral to mint new sRWA tokens at the pegged price and immediately sell them on the open market at the elevated price. This increases supply and pushes the market price back down toward the peg.
When the price is below the peg
When the price is below the peg
If a synthetic RWA trades below its pegged value, traders can buy it cheaply on the open market and use it to repay their CDP debt — effectively redeeming it at the higher peg price. This reduces circulating supply and pushes the market price back up toward the peg.
Mechanism 2: Liquidations
Liquidations protect the integrity of the collateral backing all synthetic RWAs in circulation. Every synthetic RWA is minted through a CDP, and every CDP must maintain a minimum collateralization ratio. When collateral values fall and a CDP drops below that threshold, the protocol responds automatically.- Automatic liquidation: The protocol detects undercollateralized CDPs and immediately liquidates them. The collateral is sold to cover the outstanding sRWA debt, removing unbacked tokens from circulation.
- Systemic confidence: By guaranteeing that every synthetic RWA remains fully backed, liquidations prevent scenarios where market participants would have reason to doubt the value of the tokens — which in turn supports the peg indirectly.
Liquidation is designed to protect the protocol as a whole, not to penalize individual users. Maintaining a healthy collateralization ratio in your own CDPs is the best way to avoid liquidation. See Collateralized debt positions for details.
Mechanism 3: Concentrated liquidity rewards
Even when arbitrage and liquidations are operating well, thin order books or wide bid-ask spreads around the peg price can allow short-term price deviations to persist. Airway’s concentrated liquidity rewards system addresses this directly by incentivizing liquidity providers to concentrate capital on Uniswap V4 within the price bands closest to the peg.- Targeted depth: Rewards are automatically directed to LPs who place liquidity in the price ranges most critical for peg stability, building a deep cushion around the target price.
- Slippage reduction: Concentrated liquidity at the peg means large trades have less impact on the synthetic RWA’s market price, making it harder for momentary imbalances to push the price significantly off peg.
Combined effect
The three mechanisms reinforce each other:| Mechanism | Role |
|---|---|
| Arbitrage | Market-driven price correction — fast, decentralized, continuous |
| Liquidations | Collateral integrity — ensures every sRWA remains fully backed |
| Concentrated liquidity rewards | Market depth — reduces slippage and stabilizes prices at the peg |