Here’s how USDD stays reliably pegged and why understanding the PSM is all you need to know.
Over 65% of crypto users worry about stablecoin depegs, especially after seeing past failures. USDD solves this problem not with hope, but with design.
At the heart of USDD’s stability is the Peg Stability Module (PSM) - a mechanism that directly governs price behavior. Here’s how it works, step by step:
1. Always-on conversion:
USDD can always be converted 1:1 into USDT through the PSM. This channel is permanently open and officially guaranteed, creating a direct floor and ceiling for price deviations.
2. Instant arbitrage enforcement:
If USDD drifts below $1 even slightly - arbitrageurs step in: they buy discounted USDD in the market and redeem it through the PSM for full $1 USDT. This process happens with minimal friction and quickly pulls price back to the peg.
3. Backing by real assets:
The PSM is not just a promise. It is fully supported by USDT reserves, which gives USDD tangible backing - unlike many early algorithmic stablecoins that failed due to lack of assets.
4. Continuous market reinforcement:
Every arbitrage cycle acts like a market-level “welding” mechanism, constantly pushing USDD back to $1. This is why short-term fluctuations are rare and self-correcting.
Framework for understanding USDD stability:
→ Mechanism: PSM enables unlimited 1:1 swaps with USDT
→ Market response: Arbitrage capital reacts immediately to any deviation
→ Asset support: Every USDD in the system is underpinned by real USDT
→ Outcome: Price is anchored reliably at $1
In short, USDD’s stability isn’t luck or speculation - it’s structural, backed by assets, and enforced by the market.
If you want to understand why USDD is different from other stablecoins, start with the PSM.
Master it, and you understand the peg.