The Treasury module in Nuon v2 acts as the initial repository for minters' USDC deposits. A portion of USDC in the treasury is kept as a buffer to safeguard against sudden redemptions. This buffer amount, which is initially set at 20% and is mutable via governance decisions, serves several critical purposes.

The buffer amount ensures that the Treasury remains solvent even during periods of heightened redemption activity. Without this buffer, the protocol would be forced to liquidate yield-bearing assets every time NUON is redeemed, potentially leading to inefficiencies and increased risk.

Additionally, maintaining a buffer helps stabilize the system by providing a cushion against short-term market fluctuations. By holding a portion of the deposited USDC in reserve, the protocol can mitigate the impact of sudden changes in asset prices or yield rates.

Furthermore, the buffer amount is subject to governance oversight, allowing stakeholders to adjust it based on changing market conditions or risk profiles. This flexibility ensures that the protocol can adapt to evolving circumstances while maintaining its core objectives of stability and yield generation.

However, it's important to note that while the buffer mechanism provides a layer of protection, its effectiveness relies on accurate risk assessment and prudent management. As such, ongoing monitoring and adjustment of the buffer amount are essential components of Nuon's risk management strategy.

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