Peg Maintenance

Initially, the US Dollar value peg for BitUSD will be maintained primarily through the redemption mechanism that is inbuilt to the Liquity and Prisma finance protocols. While this method of generating a hard-downside peg is well established and proven, there are many concerns that users express regarding it that may deter some users from borrowing in the protocol. In order to address these concerns we plan to expand the methods of generating a peg for the BitUSD token in the future to reduce the amount of redemptions that occur.

These methods include (but are not limited to):

1. Direct deposit/withdrawal of USD pegged assets - Assets such as other stablecoins or mtBILL that are closely linked to the dollar in value can be directly deposited and withdrawn in exchange for BitUSD at a 1:1 ratio.

2. BitUSD bonding mechanisms - When the price of BitUSD goes too low users can bond BitUSD that can then be exchanged for the principal value plus interest at some point in the future.

3. Delta-neutral strategies - Volatile assets can be used as collateral to short themselves on a perpetual futures exchange, subsequently achieving a value of 1 USD per dollar of collateral used. Ideally, while earning some positive yield from the funding rate as well.