# Ensuring Stability for iUSD

iUSD stability is meticulously upheld through a multifaceted strategy, incorporating overcollateralization, liquidation mechanisms, and arbitrage opportunities. These elements synergize to maintain iUSD's value in close proximity to its intended 1 USD peg.

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1\. \*\*Over-collateralization:\*\*

&#x20;  Each iUSD is backed by a minimum of $1.5 worth of Liquid Staking Tokens (LSTs) as collateral. Over-collateralization acts as a fundamental pillar, mitigating risks of insolvency and providing a secure foundation for iUSD holders.

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2\. \*\*Liquidation Mechanisms:\*\*

&#x20;  The iYU Finance Protocol integrates robust liquidation mechanisms to safeguard against undercollateralized positions. In the event of a user's collateral rate falling below the safe Collateral Rate, designated Liquidators can step in to buy the liquidated portion of collateralized LST, using corresponding iUSD (100% - Liquidation Reward Rate). This mechanism introduces upward pressure on iUSD, reinforcing stability.

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3\. \*\*Arbitrage Opportunities:\*\*

&#x20;  Arbitrage opportunities play a pivotal role when iUSD deviates from its 1 USD peg. Users leverage these disparities to capitalize on profit and restore iUSD to its intended value.

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&#x20;  \- \*\*iUSD price above 1 USD:\*\*

&#x20;    Users can mint new iUSD by depositing ETH as collateral, selling the newly minted iUSD on a decentralized exchange (DEX). This increases market supply, pushing the price back to 1 USD. Users can then buy back iUSD at a lower price or use it to repay loans, realizing a profit.

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&#x20;  \- \*\*iUSD price below 1 USD:\*\*

&#x20;    Users can purchase discounted iUSD on the market and redeem it within the IYU Protocol for 1 USD worth of ETH/Rebase LST. This demand-driven process elevates the price back to 1 USD, allowing users to profit from the price difference.

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4\. \*\*Premium Suppression Mechanism:\*\*

&#x20;  An automatic mechanism suppresses premiums and stabilizes the iUSD value closer to 1 USD. Excess iUSD is swapped for USDC when the premium exceeds 0.5%, contributing to the protocol reward pool. This feature ensures stability and aligns with the protocol's commitment to value preservation.
