Peg Mechanism

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Overview

trUSD targets a price of $1.00. The peg is designed to hold because any deviation from $1.00 creates a profit opportunity, and market participants take it.

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How the peg works

trUSD’s stability relies on arbitrage. When the market price moves away from $1.00, correcting it becomes profitable:

When trUSD trades above \$1.00

Say trUSD trades at $1.02 on the open market. Verified participants mint new trUSD from the protocol at NAV (about $1.00) and sell it at $1.02. Supply increases, the price falls back toward $1.00, and the arbitrageur keeps the difference.

When trUSD trades below \$1.00

Say trUSD trades at $0.98. Verified participants buy it cheaply on the open market and redeem it with the protocol at NAV. Supply shrinks, the price rises back toward $1.00, and again the arbitrageur keeps the difference.

As long as backing is maintained, every deviation is somebody’s profit opportunity. The larger the deviation, the larger the profit, and the faster capital arrives to correct it. Both external arbitrageurs and the protocol itself can act on it.

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Market price vs NAV

In normal conditions the market price stays close to NAV, and small deviations are arbitraged away quickly. In volatile markets, deviations can be larger and last longer. The incentive does not switch off: the further price moves from NAV, the more profitable it becomes to push it back. Correction speed also depends on conditions like gas costs, and the protocol may participate directly when that helps.

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What bounds the price

The bound is redemption, not market depth. Verified participants can mint or redeem trUSD with the protocol at NAV, so the secondary-market price cannot drift far from NAV without opening an arbitrage. The protocol supports this by working with liquidity providers, monitoring market conditions, and stepping into the arbitrage itself when useful.

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Transparency

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One caveat

trUSD may trade above or below $1.00 at times. The assurance is conditional, and worth stating precisely: as long as the protocol maintains its backing, the economics pull the price back to $1.00. How that backing is maintained is covered in Backing & Reserves.

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Next steps