Overview
trUSD is designed to track the value of USD, targeting a price of $1.00. The peg is maintained through economic incentives that make it profitable for market participants to correct any deviations.How the Peg Works
The Core Mechanism
trUSD’s peg stability relies on arbitrage incentives. When trUSD trades away from $1.00, market participants can profit by helping restore the peg:When trUSD > $1.00 (Trading at Premium)
When trUSD > $1.00 (Trading at Premium)
When trUSD < $1.00 (Trading at Discount)
When trUSD < $1.00 (Trading at Discount)
What happens:
- trUSD is trading below 0.98)
- Verified participants can buy trUSD cheaply on the open market
- They redeem trUSD with the protocol at NAV (~$1.00)
- This decreases trUSD supply and pushes the price up toward $1.00
- The arbitrageur profits from the difference
Why This Works
The key insight: as long as backing is maintained, any price deviation creates a profit opportunity.| Factor | How It Helps |
|---|---|
| Economic Incentive | Arbitrageurs profit from correcting deviations |
| Self-Correcting | Larger deviations = larger profits = faster correction |
| Continuous | Always active as long as deviations exist |
| Multiple Participants | Both external arbitrageurs and the protocol can participate |
Why deviations get corrected: If trUSD trades at $0.98 but the backing supports $1.00, anyone who buys at $0.98 and redeems at $1.00 earns a 2% profit. This economic incentive naturally attracts capital to correct the deviation.
Market Price vs NAV
Understanding the difference:| Concept | Definition | Where to Find |
|---|---|---|
| Market Price | What trUSD trades for on exchanges and DEXs | DEX pools, exchanges |
| NAV (Net Asset Value) | The underlying value of protocol backing per trUSD | Protocol dashboard |
Normal Conditions
During normal market conditions:- Market price stays very close to NAV
- Small deviations are quickly corrected by arbitrageurs
- Typical deviation: < 0.5%
During Volatility
During volatile periods, temporary deviations may occur. However:- Deviations create opportunity - The further price moves from NAV, the more profitable arbitrage becomes
- Self-correcting mechanism - Economic incentives pull price back toward NAV
- Protocol participation - The protocol itself may participate in arbitrage to restore the peg
Temporary deviations from $1.00 are normal during volatile markets and typically resolve as arbitrageurs capture the profit opportunity.
Supporting Mechanisms
Liquidity Provision
Deep liquidity in trUSD trading pairs:- Reduces price impact of trades
- Enables efficient arbitrage
- Minimizes slippage for users
Protocol Operations
The protocol actively supports peg stability through:- Working with liquidity providers
- Monitoring market conditions
- Participating in arbitrage when beneficial
Growing Adoption
As adoption grows:- More arbitrageurs participate
- Deeper liquidity develops
- Faster peg restoration
Peg Stability Factors
| Factor | Impact on Stability |
|---|---|
| Backing Health | Strong backing = confident arbitrageurs = stable peg |
| Liquidity Depth | Deeper liquidity = more stable peg |
| Arbitrageur Activity | More participants = faster corrections |
| Network Conditions | Low gas fees = faster, cheaper arbitrage |
What Happens If Price Deviates?
Short answer: Profit opportunities emerge that naturally correct the deviation.| Scenario | What Happens |
|---|---|
| trUSD trades at $0.98 | Arbitrageurs buy cheap trUSD and redeem at NAV for ~2% profit |
| trUSD trades at $1.02 | Arbitrageurs mint at NAV and sell for ~2% profit |
| Large deviation | Larger profit opportunity attracts more capital to correct it |
Transparency
Real-time data on trUSD pricing and backing is always available:| Data | Source |
|---|---|
| Market Price | DEXs, price aggregators |
| NAV | Protocol dashboard |
| Proof of Reserves | Accountable attestations |
| On-Chain Data | Public blockchain |