Hello guys,

Do you know how exacly the stablecoins track their backed asset's price?

I mean... sure, I know 1 ounce of gold worth $1,841.90 and for that reason I would place a order to sell/buy 1 PAXG for this exacly price. But, the price of this asset is very dynamic in the "real" market and I was wondering if there is an internal mechanism in the protocol that prevents users from offering or demanding a stablecoin for a price very different from it's real market.

If there isn't, then some intraday movement in the real market may not be followed in the stablecoin market. Which is not cool.

Likewise, If there isn't, it means the "mechanism' that guarantees the price of the token at the price of the real asset is the confidence that users have that a token is worth the backed asset. Which implies that if there is any suspicion about the company behind stablecoin or flaws in the protocol or blockchain it can lead to a strong devaluation of the stablecoin.

This hypothesis is exactly what happened at the beginning of the 20th century, during the gold standard, when it was suspected that the Government's money supply was not respecting its backing in precious metals. What ended up generating inflation (devaluation of the currency) among other problems of mistrust.

I know DAI has a different mechanism. My doubt and reflection is more related to the cases of USDT, USDC, PAX, PAXG and others.

Thank you