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Peg Stability Module

The Peg Stability Module (PSM) is responsible for allowing users to mint or redeem VOLT at the target price.

The PSM is a contract which holds a reserve of assets in order to exchange VOLT at the targt price in other assets, without a fee. There are two allowed actions mint() - buy VOLT for the target price in the accepted asset, and redeem() - sell VOLT back for the same. The current PSMs allow VOLT to be minted or redeemed in exchange for DAI or USDC.

The contract has a reservesThreshold of external assets meant to stand ready for redemptions. The PSM has a reserve threshold, which is the maximum target amount of asset to hold. Any assets above the reserve threshold can be sent into the PCV using allocateSurplus().

PSM Interfaces​

The contract implements the following interfaces:

  • PCVDeposit - to track reserves and balances
  • OracleRef - to determine price of the asset
  • RateLimitedMinter - to stop infinite mints and related issues.

PSM Fees​

The PSM currently charges the following fees:

  • 0 basis point fee on mint to allow Volt holders to mint Volt for the underlying assets with 0 friction.
  • 0 basis point fee on redeem to allow Volt holders to redeem Volt for the underlying assets with 0 friction.

Design Iterations​

Previous iterations of the PSM as in FEI Protocol used an oracle to determine the DAI price. However, this architecture was flawed and mostly resulted in Fei Protocol receiving toxic flow from MEV bots. The more recent PSMs currently in use for DAI and USDC assumes both stablecoins are always $1.