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Spice USD (Ticker USDS) is a stablecoin soft-pegged to USD in the Spice Protocol on Avalanche. USDS is in the middle. It is partially algorithmic, and partially backed.

How is USDS price stabilized?

Via arbitrage. When the price of USDS goes above $1, it becomes advantageous to mint USDS using SPICE and collateral such as USDC, and then sell the USDS on the market. If the price falls below $1, then it is advantageous to redeem USDS for collateral, which can be used to buy USDS on the market.

Mint/Redeem Process

Minting is a 1 step process, while redeeming is a 2-step process, to protect from flash loan attacks. When you redeem USDS, the smart contract will keep track of how much collateral and SPICE your address is owed. Then, after the current block, you can call the contract again to collect that amount.