# How SONE Works

**SONE: The Flexible, Decentralized Stablecoin of Sake Finance**

SONE is a flexible, decentralized, overcollateralized stablecoin native to the Soneium blockchain. It is available as an ERC20 token designed to maintain a stable rate, pegged to the U.S. dollar, even amidst market volatility. SONE seamlessly integrates into the Sake Finance Protocol, functioning as a new asset within the ecosystem. Interacting with the protocol to borrow SONE is similar to engaging with other assets within the Sake Finance environment:

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Supply Collateral –> Borrow SONE –> Repay SONE Debt

SONE is created (“minted”) or repaid (“burned”) by authorized entities known as Facilitators. Minting occurs when users supply assets with a value exceeding the amount of SONE they wish to mint. When borrowed, SONE accrues interest, with rates determined by Sake Finance Governance.

The following sections detail the core characteristics and smart contract design of SONE.

**SONE Implementation**

While interacting with SONE is similar to interacting with other assets within the Sake Finance Protocol, its implementation includes specific configurations that ensure price stability and user trust.

**Interest Rates**

The interest rate is the foundation of SONE's stability. Built directly into the smart contracts, these rates are not influenced by the traditional supply and demand dynamics but are governed by Sake Finance’s decentralized governance.&#x20;

**Facilitators**

SONE introduces the concept of Facilitators—trusted entities that can mint and burn SONE tokens using various strategies. These Facilitators may implement different approaches for integrating SONE into the ecosystem. Sake Finance governance assigns each Facilitator a specific capacity, known as a "Bucket," representing the maximum amount of SONE that each Facilitator can mint. This capacity is determined through community governance.

**Governance**

Sake Finance operates as a fully decentralized, community-governed protocol. Governance decisions are made collectively by token holders, who discuss, propose, and vote on upgrades to the protocol. Token holders can either vote on new proposals or delegate their voting power to a representative of their choice.

**Risk Management and Mitigations**

Sake Finance places a strong emphasis on risk management and mitigation in the design of its smart contracts. Like all decentralized finance protocols, Sake Finance conducts thorough risk assessments and ongoing security audits to ensure the stability and security of SONE.

**Fundamental Concepts**

This section outlines various mechanisms related to SONE, including how to borrow and repay SONE, the benefits of staking, arbitrage opportunities, and the process of minting and burning SONE tokens.

**Smart Contracts**

The smart contracts behind SONE include robust mechanisms for the emission and destruction of tokens, ensuring stability and security. The governance structure of Sake Finance plays a key role in managing and maintaining these contracts, with decisions made transparently and collectively by the community.

**Resources**

For more information, please refer to Sake Finance's official documentation, audits, and community resources.


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