# Peg Stabilty
CHI's peg stability is achieved through the use of arbitrage, allowing for an extremely tight peg around $1. This is done through direct redeemability, meaning CHI can always be minted or redeemed for $1 of collateral. This mechanism ensures that CHI's price stays close to its target of $1, with any deviation from this price creating an opportunity for arbitrage.
> For example, if CHI is trading on secondary markets above $1, then an arbitrageur can mint CHI for $1 and sell it on the secondary market for a profit. Conversely, if CHI is trading below $1, then an arbitrageur can buy the cheap CHI and redeem it for $1 of collateral, making a profit in the process. This arbitrage mechanism helps to keep CHI's price anchored to its target of $1.
Essence can also deploy PCV (Protocol Controlled Value) to secondary markets to provide liquidity for CHI, allowing extremely deep liquidity and reinforcing CHI's peg.
### Peg Stability Module
Our Peg Stability Module (PSM) at launch will be using USDC to ensure a smooth launch. We will gradually transition over to use an ETH PSM which is currently unheard of in the stablecoin space and would be a revolutionary step for decentralized stablecoins.
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