For a protocol to be trustless, the mechanisms that make up the protocol need to be fully trustless. Otherwise, mechanisms can be directly influenced by a handful of individuals who have the power to steal user funds.
TCP introduces three concepts that ensure that the decentralized network of participants controls all mechanisms, not a handful of centralized actors.
TCP derives all prices in TCP from Uniswap V3 TWAPs. Uniswap V3 TWAPs represent the true on-chain price of two assets; no centralized entity can control these prices. In addition, they are incredibly costly to manipulate due to the necessity of sustaining the manipulated price for the entire duration of the TWAP. During that time, arbitrageurs can drain the manipulator of value by bringing the price back to the true market price.
TCP reinforces price accuracy by purchasing deep liquidity around the current price range. TCP also caps the amount of liquidation rewards that can be accrued in any given time period, further reducing the incentive to manipulate prices by limiting the potential value gained.
TCP prices are backed by simple game theory, not a permissioned oracle network, a set of trusted individuals, or any other centralized mechanism.
Some protocols rely on auctions to pay off undercollateralized debt. In the time it takes to run an auction, the position being liquidated may become further undercollateralized, increasing the risk that the protocol as a whole becomes undercollateralized.
In TCP positions can be instantly liquidated so that TCP can correct undercollateralized debt before it further endangers the protocol.
Some protocols rely on the community to vote weekly on updated interest rates, introducing trust in the limited set of users who have the information and time to vote weekly on interest rate updates.