The EXIT token is a stable synthetic currency whose face value is equivalent to the US Dollar (1 EXIT token = $1 US Dollar). It is minted as an additional reward when STAKE is placed into the protocol.
In order to mint EXIT, the protocol is over-collateralized with a 2nd token pegged to ETH. This "soft ETH" value is rebalanced regularly to correspond to ETH value (1 soft ETH = 1 ETH). Soft Eth is maintained in the contract at a 2:1 ratio to the face value of EXIT. It is programmatically rebalanced to maintain this 2:1 ratio relative to the amount of EXIT minted by the protocol.
The overcollateralization mechanism (where there is always a 2:1 ratio of soft ETH to EXIT) allows EXIT to be minted as a virtual stable token. In addition, the rebalancing can be called by anyone, decentralizing the process. All stable currencies currently available are highly centralized, with rules that can be changed at any time by the people in charge. EXIT is decentralized, the process is facilitated by smart contracts and individuals who wish to participate in the EXIT virtual economy.
As a stable token, EXIT has the equivalent virtual value to other USD stable coins. Users can trade and use EXIT on the xDai chain as they would any other stable currency.
STAKE is placed into the POSDAO protocol. When a staking epoch ends, the STAKE reward contract mints & distributes STAKE, and the EXIT reward contract mints EXIT and Soft ETH, which acts to virtually balance the EXIT token.
The ETH Rebalancer contract maintains a 2:1 (Soft ETH: EXIT) ratio based on the current price of ETH. Soft ETH remains in the contract and does not enter circulation.
Stability hinges on two factors.
Face value of the token: Face value is maintained in the contract at ~ $1.00 USD per EXIT. This price may vary based on the current ETH backing value; it is rebalanced every time a call is made to the PriceOracle. The soft ETH balance is adjusted at that time to maintain the virtual 2:1 peg.
Exchange value of the token: Exchange liquidity and supply/demand market forces determine the exchange value. If there is no liquidity for trading (ie not enough DAI in an exchange to cover an EXIT trade), then the value is capped by the amount of available liquidity.