UUSD's Stability Blueprint:

A Masterful Trio

1. Overcollateralization: A Shield of Security:

UUSD stability is not left to chance; it's methodically safeguarded. Overcollateralization is our first line of defense. For every 1 UUSD, there's a safety net of at least $1.5 worth of ETH. This means that the value of what backs UUSD surpasses its issuance. It's like having an extra cushion to lean on. This strategy reduces the chance of unforeseen crises and bolsters the confidence of UUSD holders.

2. The Dance of Arbitrage: Balancing the Scales:

Next up, the elegant dance of arbitrage. If UUSD decides to sway away from its 1 USD peg, arbitrage opportunities emerge. Imagine this scenario:

• UUSD price goes above 1 USD: Smart traders step in. They mint fresh UUSD by locking ETH as collateral and then sell it on DEX, increasing supply and pulling the price back down to 1 USD. They can then scoop up discounted UZAR or use it to settle loans, pocketing the difference as profit.

• UUSD price dips below 1 USD: Savvy investors seize the moment. They buy discounted UUSD from the market and exchange it within the Universel Protocol for $1 worth of ETH. As demand surges, the price bounces back to 1 USD. This swift action turns into a win-win, either in holding onto the ETH or trading it for gains.

Arbitrage isn't just a remedy; it's a proactive stabilizer. It's the market's way of nudging UUSD back on track, all the while benefiting those who keep a keen eye on the fluctuations.

3. Liquidation Mechanisms: The Safety Net:

Finally, the liquidation mechanisms step in as a safety net. Should a user's collateral rate slide beneath the Health Factor, the protocol activates. Liquidators, the guardians of stability, spring into action. They buy the undercollateralized stETH with UUSD, creating an appreciation pressure on UUSD and thus reinforcing stability. It's a mechanism that ensures UUSD's resilience against any potential undercollateralized risks.

The Symphony of Stability:

When overcollateralization, arbitrage, and liquidation mechanisms dance in harmony, you witness UUSD's stability symphony. It's a meticulously crafted ensemble, where each note plays its part to keep UUSD in tune with its 1 USD peg. So, if you're wondering how UUSD maintains its steady rhythm, know that it's the artful composition of these three factors that makes it a stablecoin you can rely on.