📊Price Stability

Price Stability

The main pillar of price stability comes from the possibility of redeeming xETH token for the value of ETH. In other words, xETH is 1:1 pegged to the price of ETH.

Another mechanism to support the price peg is the arbitrage opportunity offered by the minting and redeeming functions.

xETH is under peg

If the value of xETH token is less than the value of 1 ETH, then anyone can purchase it on the open market and redeem it for approximately the value of 1 ETH worth of value when there is a profitable arbitrage opportunity.

xETH is over peg

If the value of 1 xETH token is more than the value of 1 ETH , then anyone can mint it with the protocol for approximately the value of 1 ETH worth of value and sell it on the open market when there is a profitable arbitrage opportunity.