Pegging mechanism

$LSDD is pegged to the price of USD by redemption and liquidation. And the pegging process is driven by arbitrage opportunities.

The ability to redeem $LSDD for ETH at face value (1 $LSDD for $1 of ETH) and the minimum collateral ratio of 150% create a price floor.

When $LSDD price falls below $1:

• Buy 1 $LSDD at the price of less than $1

• Exchange 1 $LSDD for $1 worth of ETH through the redemption

• Arbitrage opportunities will incentivize buying demand for $LSDD, thus bringing the price of $LSDD back to $1.

When $LSDD price rises above $1:

• LSDD protocol will automatically convert more LSD interest(ETH or LSD) into $LSDD

  • The conversion rate can also be adjusted by OctoDAO.

• More $LSDD supply will bring the price of $LSDD back to $1

In addition to the above two main pegging mechanisms, OctoDAO can also adjust the supply and demand of $LSDD by changing other rates in the LSDD protocol, to make $LSDD more stable.