# Peg Stability

## Asset Backing for tgUSD

tgUSD is a stablecoin backed exclusively by blue-chip stablecoins. At present, only **USDT** is accepted as collateral for minting. However, the protocol will continue to monitor developments of **USDe** on TON, as well as future native **USDC** support, to potentially expand the accepted collateral set.

Each circulating tgUSD is minted at a strict 1:1 ratio with USDT. The collateral is deployed into **principal-protected protocols**, such as **Morpho**, **Fluid**, and **Aries Market**, to generate yield while preserving capital security and full backing.

**As part of the yield deployment process, collateral is transferred across chains. Any slippage, bridge fees, or losses incurred during this process are fully absorbed by the protocol.** This ensures that users can always redeem tgUSD at full value, regardless of cross-chain execution costs.

## tgUSD Peg Arbitrage Mechanism

Because both **redeeming tgUSD for USDT** and **unstaking stgUSD for tgUSD** require cooldown periods, users seeking instant liquidity often turn to DEX swaps. This frequently causes short-term price deviations from the $1 peg—creating arbitrage opportunities:

* **tgUSD → USDT**\
  When many users swap tgUSD to acquire USDT, the pool’s USDT liquidity is drained.\
  As USDT becomes scarce, its price rises in the pool—eventually making **1 USDT > 1 tgUSD**, triggering a profitable arbitrage condition.
* **stgUSD → tgUSD**\
  Similarly, when users frequently swap stgUSD to tgUSD (to bypass the cooldown), tgUSD appreciates in the pool.\
  Arbitrageurs can compare the **swap price** with the on-chain **conversion rate** to identify profitable discrepancies.

These scenarios are frequent and expected. Arbitrage plays a natural role in rebalancing prices across pools and maintaining tgUSD’s peg stability in a decentralized, market-driven way.

## Arbitrage Examples

**Scenario 1: tgUSD trades below $1.00 on Torch Stable Swap**

* Market price: **$0.993**
* Arbitrage steps:
  1. Buy 1 tgUSD on Torch for $0.993 USDT
  2. Redeem it from the protocol for $1.00 USDT
  3. Arbitrage profit: **$0.007 per tgUSD**

**Scenario 2: tgUSD trades above $1.00 on Torch Stable Swap**

* Market price: **$1.007**
* Arbitrage steps:
  1. Mint 1 tgUSD via the protocol at $1.00 using USDT
  2. Sell it on Torch for $1.007 USDT
  3. Arbitrage profit: **$0.007 per tgUSD**

Price gaps between the protocol and DEXs like [Torch Stable Swap](https://app.torch.finance/pools#/swap?tokenIn=1%3A0%3Ab113a994b5024a16719f69139328eb759596c38a25f59028b146fecdc3621dfe\&tokenOut=1%3A0%3A89ec04b13a423a5ace4187c27be1765b457f3ceb58c5813653e360d7bfbd7e50) and [DeDust](https://dedust.io/pools/EQDoBbJWXOJUPXEvf8qWpAk7B9p1gYTSVJJVE7wzDofzb52n) already create natural arbitrage opportunities, helping to stabilize tgUSD through user-driven mechanisms.


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