The Stability Fund allows you to exchange bnUSD 1:1 with specific stablecoins. It's used as a buffer to maintain the price of Balanced Dollars, so borrowers experience less rebalancing.
Here's how the Stability Fund works:
If bnUSD is above $1, send IUSDC or USDS to the Stability Fund to mint an equivalent amount of bnUSD (minus a 0.5% fee). Sell the bnUSD at a premium for more stablecoins, and repeat until it's no longer profitable.
If bnUSD is below $1, send bnUSD to the Stability Fund to burn it, and receive an equivalent amount of IUSDC or USDS (minus a 0.5% fee). Use it to buy cheap bnUSD, and repeat until it's no longer profitable.
To limit Balanced's risk exposure for each stablecoin, the Stability Fund has a limit of 2.5 million IUSDC and 2 million USDS. The DAO can vote to increase the limits or support additional stablecoins at any time.