🚧The Peg Stability Module

The BIMA Peg Stability Module (PSM) is a mechanism designed to help USBD maintain its $1 USD peg by enabling direct, permissionless swaps between USBD and other stablecoins at a fixed 1:1 rate (minus a small fee).

What is the PSM?

The Peg Stability Module (PSM) is a smart contract system that allows users to exchange approved stablecoins (like USDC, USDP, GUSD) for USBD and vice versa at a nearly fixed rate. I

It was introduced to reduce the volatility of USBD's price and prevent it from trading significantly above or below $1.

Depositing into the PSM (Minting USBD)

A user deposits an approved collateral stablecoin (e.g. USDC) into the PSM.

The PSM mints and returns an equivalent amount of USBD, minus a small fee (e.g., 0.1%).

This increases USBD supply, which can help push the USBD price down toward $1 if it's trading above.

Withdrawing from the PSM (Redeeming USBD)

A user returns USBD to the PSM.

The PSM gives back an equivalent amount of the stablecoin (e.g. USDC), minus a fee (if any).

This reduces USBD supply, which can help raise the USBD price if it's below

Why it matters

1. Soft peg enforcement: By letting users arbitrage USBD against other stablecoins, the PSM anchors USBD to $1.

2. Monetary policy tool: Bima governance can adjust fees, debt ceilings, and supported assets to control USBD supply and peg pressure.

3. Counterparty risk: Introduces centralized risk (e.g., USDC exposure), but helps stabilize USBD during demand surges.

Example

Let’s say USBD is trading at $1.02 on the open market.

A user could:

1. Deposit 1,000 USDC into the PSM.

2. Receive ~999 USBD (with a 0.1% fee).

3. Sell USBD on the market for $1.02 each.

4. Profit from arbitrage and push USBD price closer to $1.