Redemptions

This section talks about understanding redemptions in the $ONEZ ecosystem

Redemption of ONEZ is like a safety feature that allows users to turn their $ONEZ stablecoins back into the original asset they used as collateral at a one-to-one value with the U.S. Dollar.

Redemption means you can swap your ONEZ stablecoins for the original asset you gave as collateral, like ETH, at the same value as when you got them.

Why is Redemption important?

This process keeps the value of ONEZ stable. If ONEZ costs the same as a dollar, you can always exchange ONEZ for a dollar's worth of ETH. This keeps people trusting ONEZ to be worth a dollar.

How Does Redemption Help Price Stability?

• If ONEZ starts trading for less than a dollar, people will buy it cheap and redeem it for a full dollar's worth of ETH, making a profit (called arbitrage). This buying pushes the price of ONEZ back up to a dollar.

• Similarly, if ONEZ goes above a dollar, people will mint new ONEZ by depositing collateral and selling it for more than it's worth. This selling brings the price back down to a dollar.

How Do You Redeem $ONEZ?

1. Visit https://app.zerolend.xyz/ dashboard.

2. Input how much ONEZ you want to swap to get back your collateral according to how much$ONEZ is supposed to be worth in dollars.

Redemption Fees Calculation

Under normal circumstances, the redemption fee is calculated using the formula:

(baseRate + 0.5%) * CollateralDrawn

What about Redemption fees?

A fee may be charged on the redeemed amount. This fee structure is designed to regulate the redemption process and maintain the stability of the $ONEZ ecosystem.

The fee for redeeming $ONEZ can change. It goes up a bit each time someone redeems $ONEZ, but it also slowly goes down when there aren't many redemptions. This keeps things fair and stops the fee from getting too high when it's quiet.

What is the impact of Redemptions on Borrowers?

For borrowers in the $ONEZ ecosystem, redemptions have direct implications. While they don't incur a net loss in value, they may lose some exposure to the collateral asset. This means that when $ONEZ is redeemed, some of your loan is paid off, which can be good because it means you owe less. But it also means you have fewer assets you put in as collateral.

What are the Strategies to Avoid Redemption Impact?

To minimize the risk of being impacted by redemptions, borrowers are advised to maintain a high collateral ratio. This approach reduces the likelihood of their collateral being selected for redemption.

Keeping the collateral ratio well above the minimum required level ensures that the position is not among the most vulnerable in the event of redemption activities.