Market Stability Mechanisms
Main St implements a market-driven stability mechanism for msUSD's soft peg through natural arbitrage incentives rather than algorithmic controls or forced liquidations.
Self-Correcting Arbitrage Engine
KYC-verified participants act as stability agents, capturing profit opportunities when msUSD deviates from its 1:1 target with USDC. This creates a self-correcting mechanism that naturally maintains price parity.
Peg Defense Scenarios
When msUSD falls below $1:
Arbitrageurs buy discounted msUSD from markets
Redeem with protocol at full value
Profit from the differential
This buying pressure increases demand in secondary markets, driving the price back toward $1.
When msUSD rises above $1:
Arbitrageurs mint msUSD at standard rate
Sell at premium in secondary markets
Profit from the differential
This selling pressure increases supply, bringing price back toward the target.
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