🏦 Introducing Redemptions
Redemptions allow users to exchange eBTC for stETH at face value, based on the spot BTC/stETH Oracle price. This ensures price parity regardless of the market price of eBTC. Users initiate redemptions by transferring eBTC into the system, which then calculates the equivalent amount of stETH based on the latest Oracle price. The stETH is withdrawn from the CDP with the lowest ICR and transferred to the user, with a fee deducted. The eBTC payment is deducted from the CDP's debt and burned, while the fee is deposited into the protocol's Treasury.
Redemptions result in a net-zero impact on the CDP redeemed against. If the redemption amount is equal to or higher than the CDP's debt, the debt is fully repaid, and the CDP is closed. Any excess collateral from the redemption becomes available for the user to claim.
To avoid redemption, it's recommended to maintain a high ICR relative to other CDPs. Riskier CDPs with lower ICRs are redeemed against first.
💸 Fees.
The redemption fee varies based on the daily usage volume of redemptions to limit its utilization. It increases proportionally to the daily usage volume, ensuring the stability of the peg. The fee is estimated using a formula that factors in the base rate, fee floor, alpha constant, decay factor, and time elapsed since the last redemption.
Redemptions are disabled during the initial "bootstrapping" phase.
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