When ARTH is trading below the GMU (1$), arbitrageurs will purchase ARTH from the open market and then redeem/burn the ARTH to get back the underlying collateral along with some ARTHX which is sold off in the market to realize a profit. Hence increasing the supply of ARTH to meet the actual demand for it.

Holding ARTHX is a valuable opportunity because of the following:

Limited sale of ARTHX based on a bonding curve
Buyback & burns conducted by the protocol for ARTHX holders.
Platform fees distributed as revenue for ARTHX holders
Exclusive MAHA staking pool for ARTHX holders.

ARTHX will not only absorb all the volatility away from ARTH, but it will also have long-term deflationary pressure on ARTHX.

Will ARTHX ever be over-mined?

ARTHX is minted when people redeem their ARTH for collateral, or when the protocol needs more collateral to support the peg. This means that there could be a possibility where ARTHX could get over minted if there is a spike in any of the activities above.

This is something that other fractional reserve stablecoins have failed to address, However ARTH 2.0 is well secured from such events. ie the protocol will:

Have a very high collateralization ratio (around 97–100%), minimizing the downside collateral risk to ARTHX holders.
Use of more stable collaterals (at launch the protocol will support DAI, USDC & USDT)

Risks for ARTHX holders

While there are many potential benefits in interacting with ARTH 2.0 and holding ARTHX, there are also risks that come along with the benefits. The risks have been outlined below:

ARTHX can witness sell pressure when the market turns bear. When the market turns into a bear market, the net value of the underlying collateral decreases; the protocol then buys collateral in return for a discount in ARTHX to support the peg. This ARTHX is sold by arbitrageurs to keep ARTH stable and realize a profit. (To tackle this, the protocol will limit the collateralization ratio to not go below 97%, meaning ARTHX’s exposure to such an event will only be 3% worth of the total ARTH supply).
ARTHX is a relatively new concept and can have undiscovered economic flaws.
While ARTHX will be thoroughly audited and tested before launch, the protocol may enter unknown bugs/issues, either small or big.

Refer to original medium article for more details about Maha's ARTHX: https://medium.com/mahadao/introducing-arthx-269d5fe4c2f