How loreUSD Works

Optimal usage of Lore is directly correlated to optimal understanding of the loreUSD token, why it matters, and how different market conditions can impact its use cases.

The loreUSD Peg

While loreUSD mechanics establish a soft peg to the US dollar, its true value lies in a range between $0.995 and $1.05. The reason for this is due to the minting and redemption features available to loreUSD holders.

When loreUSD is Below $1…

Each loreUSD token can be redeemed for $1 worth of collateral from the Lore smart contracts. This operation is called a Redemption, and incurs a 0.5% fee (scales up with high volume) which is sent to the Staking Pool.

Redemptions are handled almost entirely by bots within seconds of loreUSD dipping below peg. For this reason, they are only executed directly at the smart contract level.

Redemptions are different from withdrawals or repayments, as they can be performed by users whether they have an open position or not. This makes arbitrage when loreUSD is below $1 very profitable.

When loreUSD is Above $1…

When loreUSD rises above $1, minting it becomes progressively cheaper. This is because Lore values each loreUSD token as $1 at time of issuance. This means that when loreUSD is valued at $1.05 on an external DEX, every $100 of loreUSD minted nets an extra $5.

The stability pool is able to close unhealthy debt positions within Lore for a profit to ensure it remains fully collateralized. Arbitrage efficiency and liquidation bonus mean that loreUSD price may range slightly, but it should never deviate excessively from $1 without effectively being able to restore itself.

If you have questions, please reach out to the Lore team in our official Discord.