Pegging system

USDO's pegging system is a user-based approach that relies directly on arbitrage. This means that if the price of USDO goes above 1 USD, users can take advantage of the arbitrage opportunity by minting USDO on the protocol where it is always priced at 1 USD and selling it on other exchanges where it is priced higher. This mechanism has two effects on the stablecoin's peg. On one hand, it creates selling pressure in the open market, which causes the price of the USDO to decrease, bringing it closer to its peg. On the other hand, this mechanism makes it possible to increase the supply of USDO and thus implicitly decrease its value, bringing it closer to its peg.

Similarly, if the price of USDO falls below 1 USD, users can take advantage of the arbitrage opportunity by purchasing USDO on other exchanges for less than 1 USD and then selling it on the protocol where it is priced at 1 USD. This will decrease the supply of USDO on the open market and drive its price back up to the 1 USD peg. This mechanism has two effects on the stablecoin's peg. On one hand, it creates buying pressure in the open market, which causes the price of the USDO to rise, bringing it closer to its peg. On the other hand, this mechanism makes it possible to contract the supply of USDO and thus implicitly increase its value, bringing it closer to its peg.

Therefore, market players have an interest in supporting the peg because they have no way to profit from making it deviate from its initial value.

Our user-based pegging system ensures that the USDO stablecoin remains stable at its 1 USD peg by relying on the actions of its users to maintain its value. We believe that this approach provides a fair and transparent way to manage the stability of USDO while also promoting market efficiency. By empowering users to maintain the peg, our system also reduces the need for centralized interventions that could otherwise disrupt market dynamics. Overall, we are confident that our pegging mechanism will provide a reliable and sustainable foundation for USDO and its ecosystem.