The Peg Stability Module (PSM) is one of the few mechanisms offered by Nova to help further ensure that USDN stays pegged to a dollar. The PSM allows users to swap USDN for USDC and vice versa at a fixed rate.
Unlike the traditional Nova vaults, the PSM has no borrowing mechanism. The contract simply swaps the coins directly and collects a fee at the point of transaction.
When can the module be used?
It is helpful where USDN is trading above a dollar. Users can simply take advantage of the arbitrage opportunity by minting USDN from USDC. This in turn will help bring the price of USDN down closer to a dollar.
Likewise, in the event that USDN is trading below a dollar, users can redeem their USDN for USDC to take advantage of the arbitrage opportunity which eventually helps to revert USDN back up to a dollar.
Do note that there is a capped amount that the peg stability module can hold.
