Redemptions

Redemptions are the primary mechanism that maintains solUSD's $1 price floor.

How Redemptions Work

Any solUSD holder can redeem their solUSD for $1 worth of SOL at any time, regardless of market conditions.

1. A user submits solUSD for redemption
2. The protocol selects the riskiest Troves (lowest CR) to fill the redemption
3. The redeemer receives $1 of SOL per solUSD redeemed (minus the redemption fee)
4. The affected Troves have their debt reduced and collateral removed accordingly

Why Riskiest Troves First?

Targeting the lowest-CR Troves first serves two purposes:

• Improves system health — the riskiest positions are reduced first
• Incentivizes healthy CRs — borrowers are motivated to maintain higher collateral ratios to avoid being redeemed against

Peg Protection

Redemptions create a hard price floor for solUSD:

• If solUSD trades below $1, arbitrageurs can buy it cheaply and redeem for $1 of SOL — profiting from the difference
• This buying pressure pushes the price back toward $1
• The mechanism is trustless and automatic

Redemption Fee

A dynamic fee applies to redemptions:

• Base rate: 0.5%
• Increases with high redemption volume, decays back to 0.5% over time

This fee prevents excessive redemption activity and protects borrowers from unnecessary position closures during normal market conditions.

Impact on Borrowers

If your Trove is redeemed against:

• Your debt decreases (the redeemed solUSD is burned)
• Your collateral decreases (SOL is sent to the redeemer)
• Your CR stays roughly the same (both sides of the ratio shrink proportionally)
• You lose no net value — but your position becomes smaller

To minimize your chance of being redeemed against, maintain a high collateral ratio (well above 125%).

Example

A redeemer submits 1,000 solUSD:

• Protocol finds the lowest-CR Trove
• Redeemer receives ~$995 of SOL (after 0.5% fee)
• The affected Trove's debt is reduced by 1,000 solUSD and collateral reduced by $1,000 of SOL