# peg

it is essential for a stablecoin to maintain its peg. we have implemented a variety of mechanisms to ensure a robust peg.

for starters, **mUSD will always be overcollateralized**. this protects the protocol during periods of volatility, ensuring stability and preventing cascading liquidations.

while overcollateralization secures the peg on a protocol level, the utility of mirage assets opens them up to significant trading pressure on the open market. lets take a closer look:

* buy pressure is created by traders swapping into mUSD, which serves as margin on the mirage market and is needed to place trades.
* sell pressure is created when LPs swap their minted mUSD into other tokens.

mUSD will be held in [correlated liquidity pools](https://blog.pontem.network/liquidity-pool-mechanics-9ddaf22e7c55). this will significantly reduce price slippage even during periods of one-sided trading and low liquidity. however, it’s still possible that excessive buy or sell pressure causes mUSD to temporarily depeg. let’s go over the arbitrage mechanism that comes into play in both potential cases:

**mUSD depegs and rises over $1:**

* mUSD can be minted on mirage at a fixed price of $1, then sold on the open market for over $1, creating constant sell pressure until a repeg.

**mUSD depegs under $1:**

* outstanding loans of mUSD can be paid back for cheaper than they were borrowed, causing buy pressure on mUSD until price stabilizes.

this mechanism incentivizes users to engage in arbitrage, generating profits for themselves while securing the peg of mUSD.


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