> For the complete documentation index, see [llms.txt](https://elysia.gitbook.io/elusd/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://elysia.gitbook.io/elusd/how-it-works/arbitrage-strategy.md).

# Arbitrage Strategy

ELUSD’s core yield comes from the Kimchi Premium. The protocol monitors market data in real time and automatically executes in two directions depending on the premium level.

#### 1) When the Premium Is High

The domestic USDT price is overvalued vs. global markets. The protocol sells USDT to realize the spread and hedges KRW/USD FX risk during the KRW-holding window.

**Flow (Spot/Fiat-based Hedge)**

* Sell USDT → KRW on a Korean exchange (spread realized).
* Withdraw KRW to the exchange-linked bank account.
* Remit KRW to the FX-hedging platform.
* Convert KRW → USD on the platform and hold (FX risk hedged).

**Flow (Futures-based Hedge)**

* Sell USDT → KRW on a Korean exchange (spread realized).
* On a global futures venue, open an offsetting KRW short of equal notional (with N× leverage, as applicable).

<figure><img src="https://1968746292-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FNZ02NcOSIuVHL3dPqtaN%2Fuploads%2FNYJQcnXNer8ZEz29zQnX%2Fdoc_05.png?alt=media&amp;token=6e835e89-0d30-4ca6-835d-f0656a6d4ea2" alt=""><figcaption></figcaption></figure>

#### 2) When the Premium Is Low

The domestic USDT price is undervalued vs. global markets. The protocol uses KRW to accumulate USDT, positioning for future sell opportunities when the premium widens.

**Flow (Spot/Fiat-based Hedge)**

* On the FX-hedging platform, convert USD → KRW.
* Remit the converted KRW to a bank account, then deposit to the exchange.
* Buy USDT with KRW and hold (for future sale).

**Flow (Futures-based Hedge)**

* Buy USDT with KRW on the exchange.
* On the global futures venue, close the existing KRW short.

<figure><img src="https://1968746292-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FNZ02NcOSIuVHL3dPqtaN%2Fuploads%2FNkqjApMALI9krNZn3V7e%2Fdoc_06.png?alt=media&amp;token=2283d75c-60c7-4d16-b9a5-ef076c500220" alt=""><figcaption></figcaption></figure>