Orby Network
  • Introduction
    • What is Orby?
    • What is $USC?
  • Tokenomics
    • $ORB
    • $esORB
    • The Vault
  • Overview
    • $USC Borrowing & Repayment
      • Borrowing $USC
      • Repaying $USC
    • Supported Collateral
      • Collateral Risk Parameters
    • Liquidations & the Stability Pool
      • Liquidations
      • Stability Pool
    • $USC's peg stability & Redemptions
      • Base Rate
      • Redemption Mechanism
    • Understanding Liquidations vs Redemptions vs Repayment
    • Risk Dashboard
    • Recovery Mode
      • Liquidations in Normal Mode
      • Liquidations in Recovery Mode
    • Security & Audits
    • Orby Ecosystem & Partnerships
    • Airdrop Campaign
      • Airdrop Seasons
        • Season 1
        • Season 2
      • How to claim airdrop rewards?
      • Airdrop Terms and Conditions
  • User Guide
    • How to connect to Orby Network
    • How to borrow $USC
      • Opening a new shuttle
      • Borrowing more $USC
    • How to repay $USC
      • Repaying debt partially
      • Repaying debt fully
    • How to obtain collateral
    • How to add collateral
    • How to withdraw collateral
    • How to use the Stability Pool
      • Depositing $USC
      • Withdrawing $USC
      • Claiming Stability Pool rewards
    • How to stake $esORB/$ORB
    • How to track points
    • How to use the Redemption feature
      • Getting the Best Exchange Rate
      • VVS Swap Widget
    • How to recover collateral after liquidation
    • How to recover collateral after redemption
    • Glossary of Terms
  • Additional Info
    • Smart Contract Addresses
    • Price Oracle
    • Team Wallets
    • Risk Disclosure
    • Terms of Use
    • Brand Guidelines
    • Bridging
    • Bug Bounty
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  • Borrowing / Repayment Fees
  • Redemption Fees
  1. Overview
  2. $USC's peg stability & Redemptions

Base Rate

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Last updated 1 month ago

Borrowing / Repayment Fees

  • (Normal) Borrowing Fees: borrowing_amount * (BASE_RATE + 0.5%) (up to a max of 5%)

  • (Recovery Mode) borrowing Fees: 0%

  • Repayment Fees: 0%

For example, when the borrowing fee stands at 1.5% (base rate = 1%), and the borrower wants to borrow 1,000 $USC. The borrower will incur a debt of 1,000 * (1+1.5%) + 20 = 1,035 $USC after the Borrowing fee and liquidation reserve is added.

Redemption Fees

  • Redemption Fees: redemption_amount * (BASE_RATE + 0.5%) (up to a max of 5%)

The Base Rate is the key variable that acts as a soft peg mechanism by encouraging or discouraging the borrowing of $USC.

This Base Rate starts off at 0 but increases with every redemption event:

  • Base Rate (t) = Base Rate(t-1) + a * (USCredeemed/USC redeemed/USCredeemed/USC supply), a = 0.5

If redemption demand is high, it likely indicates a high supply of $USC, and that it’s trading below peg. An increase in the Base Rate makes it expensive to borrow more $USC, effectively curbing the supply of new loans. This decrease in $USC supply over time gradually pushes the price back up to peg.

The Base Rate has a decay factor from the time since the last fee event, be it the last borrowing or redemption of $USC. With the current set up, the half life of the Base Rate (time it takes for Base Rate to halve from last event) is half a day:

  • Base Rate (t) = Base Rate(last fee event) * b^(block since last fee event / blocks produced in ½ day), b = 0.5

No fee events likely indicate that fees are too high for both redemptions or borrowing. This decay helps regulate fees when it becomes too exorbitant for market conditions.

Notes:

  • The redemption fee is charged in the respective collateral currency (e.g. cdcETH).

  • The borrowing and redemption fee floor is set at 0.5% in Normal Mode. In Recovery Mode, the borrowing fee will be 0%. (more details on Recovery Mode can be found here)