> For the complete documentation index, see [llms.txt](https://docs.axis.to/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.axis.to/usdx-the-synthetic-dollar/peg-stability.md).

# How USDx Targets $1

{% hint style="info" %}
**This page describes how the peg mechanism is designed to work. It is not a guarantee of peg performance.** USDx can trade above or below $1.
{% endhint %}

USDx, the Axis Dollar, is designed to reference the US dollar, but its market price is set by buyers and sellers. The protocol's main price-stability pathway is a two-sided **arbitrage incentive** that pulls the market price back toward the value of the backing. It works in both directions, carried by approved counterparties who can access the primary market.

## The peg-arbitrage mechanism

The peg is held by arbitrage on both sides of the target, not by a hard price lock:

* **When USDx trades at a premium.** Above the value of its backing, an approved counterparty can buy collateral from the primary market, mint new USDx at roughly the value of the backing, and sell that USDx into the premium on the secondary market. The added supply works to push the price back down toward backing.
* **When USDx trades at a discount.** Below the value of its backing on the secondary market, a counterparty can buy USDx cheaply on the secondary market and redeem it with the protocol at the value of the backing. The reduced circulating supply works to push the price back up toward backing.

In each direction the arbitrage *incentive* exists, the spread between the market price and the backing is what a participant may capture, but it is not a promise of profit. Arbitrage of the primary market (minting and redeeming) requires being an **approved counterparty**; the secondary-market leg is open to anyone. These are arbitrage incentives, not a hard price lock.

![The potential above-target minting pathway and below-target redemption pathway for USDx.](/files/DkBn2bYPRjIfWlwLeSL3)

The word **may** is essential. An incentive only affects price if participants can execute it and if the trade remains economical after liquidity, timing, fees, and risk.

## What the contracts contribute

The primary market (`USDxMarket`) validates signed order terms, supported collateral, registered custody routes and channels, order deadlines, one-time nonces, authorized operators, and configured capacity caps (`CapConfig`). These controls define how primary issuance and redemption can occur.

The contract does not automatically force the secondary-market price to $1, calculate orders from an external price oracle, or guarantee continuous operator and collateral availability.

## Why USDx can trade away from $1

A premium or discount can persist when:

* minting or redemption is rate-limited by capacity caps, paused, or unavailable;
* an operator, custodian, or venue is unavailable;
* the specified collateral cannot be delivered on time;
* secondary-market liquidity is thin;
* transaction costs exceed the available arbitrage spread;
* market participants price in custody, strategy, smart contract, or regulatory risk.

## sUSDx does not set the USDx price

The sUSDx exchange rate reports how much accounted USDx each sUSDx position represents. It does not report the US-dollar market value of USDx. If USDx trades below $1, an sUSDx position worth more than one USDx can still be worth less than the same number of US dollars.

## No absolute peg guarantee

The mint-and-redeem pathway is intended to create incentives around the target price. It cannot eliminate every reason that the market price might diverge, and it does not make USDx equivalent to cash or an insured bank deposit.


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