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:

1. Arbitrageurs buy discounted msUSD from markets

2. Redeem with protocol at full value

3. Profit from the differential

This buying pressure increases demand in secondary markets, driving the price back toward $1.

When msUSD rises above $1:

1. Arbitrageurs mint msUSD at standard rate

2. Sell at premium in secondary markets

3. Profit from the differential

This selling pressure increases supply, bringing price back toward the target.