Peg Stability Module: The Last Piece of The Infinity Stones

Yeti Finance
3 min readDec 3, 2022

Launching December 7th: Swap YUSD and USDC at a 1-to-1 ratio.

The Yeti Finance protocol has been undergoing some major developments in the last few months!

On November 1st, the highly anticipated, new borrowing model was launched which resulted in significant reduction of one-time borrowing fees and a move toward recurring interest.

Afterwards, we saw multiple product launches which centered around borrowing against new, high-demand collaterals like GMX’s GLP and the native Avalanche bridged Bitcoin assortment : BTC.B., aBTC.B, and qiBTC.B.

Throughout this period, users also saw a huge revamp of the Yeti Finance website. The launch of the significantly improved and redesigned web and mobile app, protocol and collateral stat pages, and introduction of portfolio analytics to name a few of the changes.

These releases have been well-received, and as a result the protocol has seen a major increase in borrowing activity. Additionally, mitigating redemptions, one of the main goals the new borrowing model sought to achieve, has been largely successful.

Now we are happy to complete the deployment of this new version of the Yeti Finance protocol with the release of the Peg Stability Module (PSM) launching December 7th, 2022!

What is the Peg Stability Module (PSM) ?

The Peg Stability Module or PSM is a smart contract which allows for the permission-less, autonomous swap of YUSD to USDC or USDC to YUSD at a 1 to 1 ratio. At launch, users will be able to go to app.yeti.finance/#/psm and trade 1 YUSD for 1 USDC or 1 YUSD for 1 USDC when avaliable.

USDC sitting in the PSM will be deposited into Aave in the meanwhile.

Why is this significant?

The Peg Stability Module has two high-level goals: increase the available borrowing capacity for future borrowers and further mitigate redemptions for current borrowers.

Currently, YUSD is slightly above $1; however, with the introduction of the PSM users can trade 1 USDC for 1 YUSD anytime YUSD is above $1, resulting in the increase in the supply of YUSD and closing of that difference.

The PSM smart contract accumulates a store of USDC, as users trade USDC for YUSD, giving future Yeti borrowers another place to exchange their YUSD for USDC 1 to 1. This enables greater swap capacity for YUSD and subsequently greater borrowing capacity for new users looking to borrow YUSD, as the PSM becomes the am option for swapping once it builds capacity!

The introduction of the peg stability module creates a new line of defense against downward peg movements. With this release, redemptions will be further mitigated and borrowers can worry less about being redeemed.

To start, there will be a 0.01% swap fee and a PSM capacity of 2 million YUSD. As the peg stability module fills up with USDC, we will continue to discuss with the community on how to best adjust these parameters.

Thanks for reading, and stay tuned for more updates!

Yeti Finance is a next-gen borrowing protocol built on Avalanche. This innovative protocol enables users to borrow against their entire portfolio of crypto assets, while continuing to receive the rewards that the assets they have deposited earn.

Unlock deep liquidity, borrow at the lowest collateral ratios, and borrow against your entire portfolio to gain better protection against liquidations.

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