Peg Stability Modules
As a synthetic asset, $dpxETH intends to maintain price parity with $ETH. However, since it is merely soft-pegged to $ETH via our dpxETH/ETH Curve stableswap pool, pricing is derived from AMM mechanics which can be de-pegged in the event of reserve imbalances.
Thus, the v2 system has a number of Peg Stability Modules ("PSMs") that allow users to profit from arbitrage whilst restoring the peg.
When $dpxETH is greater than 1.01 $ETH, users will be able to mint $dpxETH with $ETH at a 1:1 ratio. They can then swap $dpxETH for $ETH in the Curve pool to arbitrage the peg differential.
Users arbitraging the pool will increase its $dpxETH balance while reducing its $ETH balance, restoring the peg.
When $dpxETH is between 0.985 $ETH and 0.99 $ETH, the rDPX v2 Treasury may swap $ETH for $dpxETH in the Curve pool. This is a privileged function that can only be called by veDPX holders > 1k veDPX and specified admin accounts.
This swap will increase the Curve pool's $ETH balance while decreasing its $dpxETH balance, restoring the peg.
When $dpxETH is less than 0.985 $ETH, veDPX holders will be able to redeem $dpxETH for its underlying backing in the form of 75% $ETH and 25% $rDPX, allowing them to arbitrage the peg differential.
When $dpxETH is purchased from the Curve pool for the purpose of redemption, this will increase the Curve pool's $ETH balance while decreasing its $dpxETH balance, restoring the peg.