> For the complete documentation index, see [llms.txt](https://delea-finance.gitbook.io/home/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://delea-finance.gitbook.io/home/delea-protocol-cdp/mechanisms/peg-mechanism.md).

# Peg Mechanism

Delea employs a comprehensive approach to ensure $DONE's stability and maintain its peg to the US Dollar. This system incorporates over-collateralization, incentive mechanisms, and market arbitrage.

**Over-Collateralization**:\
Each 1 $DONE is secured by at least $1.25 worth of TON and LST (Liquid Staking Tokens) as collateral. By maintaining over-collateralization, Delea ensures stability by guaranteeing that the value of the collateral backing $DONE is always greater than the value of $DONE itself. This extra collateral acts as a safety buffer, reducing the risk of default and providing security to $DONE holders.

Liquidations are triggered at 125% CR (Collateral Ratio).

Delea's liquidation mechanisms are designed to manage undercollateralized positions effectively. If a user’s CR falls below the safety threshold, anyone can step in as a Liquidator. This involves purchasing the at-risk collateralized LST and paying with an equivalent amount of $DONE, adjusted for the Liquidation Reward Rate. This process not only creates upward pressure on $DONE's value but also contributes to the protocol's overall stability.

Incentive Mechanisms:

* Interest Fee: An interest fee incentivizes timely loan repayment and collateral management.
* Liquidation Penalty: A minimum 10% penalty on liquidations encourages users to maintain a healthy CR of their positions.\
  \ <br>

**Market Arbitrage:**\
Price stability is reinforced through market arbitrage, which helps correct any significant deviations from the peg.

* When $DONE Price Is Above 1 USD:

  * Minting and Selling: If $DONE’s price exceeds 1 USD, users can mint new $DONE by providing collateral ($TON, $StTON, and $tsTON) and sell it on a decentralized exchange (DEX).
  * Market Impact: The increased supply of $DONE from these sales helps bring its price back toward 1 USD.
  * Profit Realization: Users can profit by repurchasing $DONE at a lower price later or using it to repay loans.

* When $DONE Price Is Below 1 USD:
  * Buying Discounted $DONE: Users can purchase $DONE at a lower market price.
  * Redemption Process: They can then redeem the discounted $DONE within Delea for 1 USD worth of collateral assets like $TON.
  * Market Correction: This redemption increases demand for $DONE, pushing the price back up to 1 USD.
  * Profit Opportunities: Users can either keep the redeemed collateral or sell it, benefiting from the price difference.