What Is the Role of the Stability Fee in This System?

The stability fee is an annual, variable interest rate charged to users who mint (borrow) the stablecoin against their collateral in an over-collateralized system. Its primary role is to incentivize users to repay their debt and to act as a monetary policy tool to help maintain the stablecoin's peg.

If the stablecoin trades below its peg, the fee can be increased to encourage users to buy and burn the stablecoin to repay their debt, contracting supply and raising the price.