Peg Stability Module

The introduction of the Peg Stability Module (PSM) is intended to prevent significant positive premiums on PUSD during large-scale buybacks, ensuring the redemption mechanism remains economically viable.

• When the Active Redemption Mechanism is triggered, the Stability Fund directly buys back PUSD or purchases USDC, then uses the PSM to mint PUSD on a 1:1 basis with USDC. These PUSD are subsequently burned, thereby reducing the supply of PUSD in the market and restoring balance.

• Once the demand for long positions recovers or the demand for PUSD decreases, the Stability Fund will execute the inverse process described above, minting PUSD through the protocol, exchanging it 1:1 for USDC through the PSM, and selling the USDC on the market.

Essentially, the PSM acts as a safeguard for system stability in extreme situations. As the balance gradually returns to normal, the reliance on the PSM will be reduced to zero.