Why can USDD reliably maintain a value of 1 dollar?
Stablecoins, the key lies in 'stability'. We have seen too many stablecoins experience price roller coasters, so what tricks does USDD have to make itself wobble like a top and return to 1 dollar regardless of how it is pushed? The secret lies in its establishment of an 'official 1:1 exchange store', scientifically known as PSM.
This 'official store' is particularly domineering; it announces: regardless of whether the market price outside is rising or falling, you can always exchange 1 USDD for 1 USDT here, or exchange 1 USDT for 1 USDD, with the exchange rate remaining unchanged.
Don't underestimate this store; it is the 'stabilizing force' in the market. Why is it so powerful? Because it activates the strongest force in the market—arbitrage, also known as 'flippers'.
Let me give you an example to clarify. Suppose due to market panic, USDD drops to 0.99 dollars on the exchange. The 'flippers' will light up with excitement and take immediate action: they buy USDD at the market price of 0.99 dollars and then rush into the 'official store' to exchange it 1:1 for 1 dollar worth of USDT. In this flip, each USDD nets a profit of 1 cent.
Just think, with so many 'flippers' scrambling to buy cheap USDD in the market, what will happen? The demand surges, and the price of USDD will naturally be quickly pulled back to 1 dollar. Conversely, if USDD rises to 1.01 dollars, the 'flippers' will sell the USDD they bought from the 'official store' in the market to profit from the price difference, which will again push the price back down.
Therefore, the price stability of USDD does not rely on the team spending money to buy and sell in the market to 'support the price', but rather relies on this 'official store' setting an unyielding anchor point, and then leveraging the flippers' instinct for profit to automatically pull the price back on track. This mechanism is very clever, equivalent to using economic principles to equip itself with an automatic stabilizer.
