Vaultedge docs
  • Introduction
  • 🏭The protocol
    • General
    • Terminology
    • Borrowing
      • Vaults
      • Risk methodology
      • Soft liquidations
      • Stability pool
      • Recovery mode
      • Collateral Whitelisting
      • Whitelisted assets
      • Fees
      • VE tokens management
    • veUSD
      • Price stability
      • Maintaining the peg
    • The flywheel
  • Terms and Conditions
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  1. The protocol
  2. veUSD

Price stability

Low volatility around the peg

veUSD is designed to be a low-volatility payment coin soft-pegged to the USD. There are several mechanisms embedded into the platform to ensure a low price deviation in both directions under normal market conditions.

  • Debt Issuance and Repayment: If the price of veUSD falls below parity by more than the issuance fee, (veUSD < USD) then users of the platform are incentivized to buy veUSD in order to repay their debt. In the opposite direction, when the price of veUSD goes above parity (veUSD > USD) by more than the issuance fee, users are incentivized to borrow more in order to purchase assets at a discount.

  • Issuance fees: Those fees have an immediate short-term effect on the veUSD monetary policy as the supply is impacted right away. Higher fees make new loans less attractive, decreasing the new generation of veUSD if there is not enough demand to keep up with the supply.

  • Soft liquidations mechanism: Arbitrageurs can make instant gains whenever the collateral asset they get in return is worth more than the current value of the soft liquidated veUSD.

  • Market arbitrage: Arbitrage bots run on exchanges to stabilize the veUSD price.

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Last updated 2 months ago

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