The arbitrage conditions mentioned are a natural market process. To ensure the stability of the USDX token, Orbitium has implemented additional safeguards against market volatility, malicious attacks, and other security breaches. These safeguards are activated in the following order:

1. Collateral liquidation: In the event that the liquidation threshold is breached, the borrower's collateral is sold to stabilize the credit line.
2. Emergency Shutdown: In the event of extreme market volatility or other security breaches, the protocol can be shut down temporarily to prevent further losses.
3. Safeguard reserve: A reserve of USDX tokens is held in the Orbitium vault to cover any losses incurred during extreme market conditions.
4. Security Module: A security module is based on staked tokens to provide additional protection against security breaches and malicious attacks.

1. Liquidation of collaterals

When the value of the collateral supporting a loan falls, the user will receive a notification to stabilize their credit line health by adding more collateral or repaying some of the outstanding credit.

If no further deposit of that collateral is made to the vault, and the LTV ratio exceeds the Liquidation Threshold, a portion of the vault assets will be liquidated to stabilize the credit's LTV. The protocol will attempt to sell the assets on the open DeFi market at a discounted price starting at 5% lower than the market price.

Only as many assets will be sold as necessary to do so, with a maximum of 50% of the underlying assets sold in a single liquidation cycle. Liquidations may repeat until the entire collateral is sold.

2. Emergency Shutdown

The emergency shutdown protocol is a mechanism designed to protect Orbitium's assets in case of significant market volatility, malicious attacks, or other security breaches. It allows the DAO to halt all operations, including collateral deposits, borrowings, repayments, and trading. The emergency shutdown protocol is designed to minimize losses and ensure the long-term viability of the Orbitium platform.

Refer to the Emergency Shutdown Protocol section for more information.

3. Safeguard Vault

The Orbitium safeguard vault is an on-chain reserve to be liquidated in the event of prolonged uncertainties. It is initially funded with a portion of the raised funds and is continuously augmented with a portion of protocol earnings from the treasury.

The goal of the safeguard vault is to remove unbacked USDX from the market by releasing its reserves for auction against payment in USDX, thereby elevating the price point of the stablecoin.

The release of the safeguard vault reserves is subject to community governance, meaning that the community has a say in how and when the reserves are released.

4. Security Module

The Security Module is a feature that provides an extra layer of protection for the USDX stablecoin. It works by using a portion of the tokens staked in the system to compensate for any shortfall in collateral backing the USDX, if all other safeguards have failed to maintain the peg. Up to 40% of the staked tokens can be liquidated for this purpose.