# Flux USD (fUSD)

## What is Flux USD (fUSD)?

**fUSD** is the **1:1 USD-pegged stablecoin** issued by Flux. It is **fully decentralized, overcollateralized**, and backed only by **XRD and LSULP**.

Unlike most competitors, fUSD is designed for **resilience**:

* **Only backed by crypto assets**—no real-world assets or centralized custody.
* **Directly redeemable**—always convertible in a fast and liquid way.

## Why fUSD instead of other stablecoins?

* fUSD is backed **only by the most decentralized assets**: XRD and LSULP.
* It is **always redeemable** for its underlying assets, meaning it can be swapped **1:1** for the collateral backing it (for a small fee).
* **Flux Reservoirs** allow fUSD holders to earn **real yield** on their deposited fUSD .
* **ILIS DAO support** ensures the smart contracts are protected and governed in a decentralized way, and liquidity providers of fUSD are rewarded using protocol generated interest.

## How does fUSD stay pegged?

Flux **uses a market-driven approach** with user-set interest rates to dynamically maintain the peg.

**If fUSD trades above $1**

* Borrowers reduce rates to minimize redemption risk.
* Lower rates make borrowing fUSD less attractive, **pushing the price back down**.

**If fUSD trades below $1**

* Arbitrageurs redeem fUSD for collateral, **reducing supply** and increasing price.
* Borrowers face higher redemption risk and raise rates, boosting fUSD demand and deposits.


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