PWRD stablecoin increases in value through a rebasing mechanism. This means that when a rebase occurs, the supply of the token is increased algorithmically, whenever yield generated by protocol strategies exceeds a certain threshold
Any potential losses on the protocol accrue to Vault first, so we would not expect PWRD to rebase negatively. In the unlikely event that the protocol loses more money than the whole Vault covers, this could however occur. This would require the total simultaneous failure of multiple stablecoins and/or protocols.
Positive rebases on PWRD only accrue in gradual increments, small enough to not cause front-running risks from larger PWRD users.
Composability issues for rebasing tokens primarily concern larger rebasing events and smart contract that store users' token balances in a separate record. This means that PWRD cannot be used on some DeFi protocols, including layer 2 DEXes. The protocol roadmap contains the option to wrap PWRD, however we will understand customer need (and whether this adds meaningful value to users) before building this feature.
Reminder about Risk
DeFi is still a very new space, and while that's exciting, it comes with risk. Gro Protocol's software helps you access this world, but make sure you do your own research and only supply assets you can afford to lose.