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Peg Arbitrage Mechanism

The USB peg is maintained by market forces and arbitrageurs.

Scenario A: USB > $1 (Premium)​

  1. Arbitrageur buys collateral (e.g., ETH) for $1.
  2. Arbitrageur mints 1 USB at the protocol (valued at $1).
  3. Arbitrageur sells 1 USB on the market for >$1.
  4. Profit: Price - $1.
  5. Result: Sell pressure returns USB to $1.

Scenario B: USB < $1 (Discount)​

  1. Arbitrageur buys USB on the market for <$1.
  2. Arbitrageur redeems 1 USB at the protocol for $1 of collateral.
  3. Arbitrageur sells collateral for $1.
  4. Profit: $1 - Price.
  5. Result: Buy pressure returns USB to $1.

This mechanism ensures tight peg stability as long as the protocol is solvent and redemption is open.