Cryptocurrency Q&A
How does cUSD maintain its peg to the US dollar?
How does cUSD maintain its peg to the US dollar?
EchoSolitude
Wed Aug 21 2024
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6 answers
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Could you elaborate on the mechanisms in place that enable cUSD to maintain its peg to the US dollar? I understand that stability is crucial for users to trust and adopt such a cryptocurrency, so I'm curious about the specific strategies and processes used to ensure that the value of cUSD remains closely tied to the value of the USD. What are the primary factors that contribute to this stability, and how are potential deviations from the peg addressed?
6 answers
KatanaGlory
Fri Aug 23 2024
The Celo Protocol operates with a unique mechanism to maintain the stability of its stablecoin, cUSD. When the market value of 1 cUSD falls below the pegged value of one US dollar, the protocol initiates a corrective measure.
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CryptoNerd
Fri Aug 23 2024
To counteract the decline in cUSD's value, the Celo Protocol sells CELO tokens from its reserve pool. These sales are conducted in the open market, targeting to acquire cUSD tokens in exchange.
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CryptoTamer
Fri Aug 23 2024
By purchasing cUSD tokens, the protocol effectively reduces the circulating supply of cUSD in the market. This reduction in supply, in turn, exerts upward pressure on cUSD's market value.
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Chiara
Fri Aug 23 2024
As a result, the Celo Protocol aims to restore the one-to-one peg between cUSD and the US dollar, ensuring stability and trust in the stablecoin.
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Giulia
Thu Aug 22 2024
Conversely, when the market value of cUSD exceeds the pegged value of one US dollar, the Celo Protocol adopts a different approach to maintain stability.
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