AVAI is an asset that is pegged to the US Dollar; in other words, a coin intended to float as close to $1.00 USD as possible. It will be backed by locking tokens as collateral in a personal Vault in a Orca Bank as well as via other mechanisms
The entire process is decentralized and does not use a middleman such as a financial institution, meaning simply that the user is in full control of their funds at all times.
An Orca Bank is the contract that allows a user to deposit a specific ERC20 as collateral, granting AVAI in return. Using the USDC token as an example, if a user deposits $150 USD worth of collateral funds into a Vault, they will have the ability to borrow up to 100 AVAI, worth $100 USD. This grants them the opportunity to invest a total of $250 USD, while owing a stable $100 USD.
Each ERC20 token will have a dedicated Bank. When a Bank is made, a user can then create a personal Vault(s) within that bank. A Vault is a smart contract that stores a user's collateral for that Bank type.
AVAI is only burnt when collateral no longer backs it. This is done when a use re-pays a loan, or a user redeems AVAI for USD using the Exchange mechanism. AVAI is always backed by collateral, either through Vaults or through the Exchange.