How aUSD Works

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

The aUSD Peg

While aUSD mechanics establish a soft peg to the US dollar, its true value lies in a range between $0.995 and $1.08. The reason for this is due to the minting and redemption features available to aUSD holders.

When aUSD is Below $1…

Each aUSD token can be redeemed for $1 worth of collateral from the Aurelius 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 aUSD 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 aUSD is below $1 very profitable.

When aUSD is Above $1…

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

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