Redemption Mechanism

TLDR: Swap 1 $USC for USD 1 worth of $cdcETH - any time

You can think of redemptions like a swap on a DEX. The main difference is that the swap is one-sided - you can only swap $USC for $cdcETH and not the other way around.

1 $USC can always be redeemed for USD 1 worth of collateral on Orby’s platform. This Redemption Mechanism works to enforce a hard peg for the value of $USC when it falls below USD 1. Users can buy $USC from the open market and redeem it 1:1 for USD worth of the underlying collateral. This action of purchasing $USC is expected to eventually push the stablecoin’s price back to peg.

Anyone can utilise this feature, but may be charged a variable redemption fee on the redeemed amount. The redemption fee utilises the Base Rate as a variable and, as mentioned above, increases with every redemption event. As such, users may be expected to use this redemption mechanism when it makes economic sense e.g. when $USC trades below peg.

Redemptions are not the same as repaying one’s $USC debt. For repayments, users pay back their own $USC debt in their own shuttles. For redemptions, users swap out $USC 1:1 for someone else’s collateral. The collateral that gets redeemed first comes from the “unhealthiest” shuttles in Orby’s system. Shuttle health is determined by the collateral ratio - Shuttles with the lowest collateral ratio are considered the “unhealthiest” shuttle.

Note:

• The best way for users to avoid getting their collateral redeemed against is to ensure that their shuttle’s collateral ratio is healthier than your peers

• The owner of the shuttle technically does not incur a net loss in this process as their debt is paid in exchange for shuttle collateral

Commonly asked questions

What's the incentive for me to use the Redemption Mechanism?

If the price of $USC falls below $1 on an exchange (e.g. $0.90), you can:

1. buy $USC on the exchange for $0.90, and

2. redeem 1 USC for $1 worth of $cdcETH

You will be able to profit from the $0.10 difference (minus a redemption fee)

Are redemptions = repaying my debt?

No.

Redemptions = swap your USC for someone else's collateral

Repayment = repay your own shuttle's USC debt and retrieve your collateral

What fees will I incur from using this feature?

You will incur a variable redemption fee every time the Redemption feature is used.

How is my shuttle impacted by the Redemption Mechanism?

Shuttles are ranked from lowest (most unhealthy) to highest collateral ratios (healthiest). The most unhealthy shuttles will get redeemed first.

If your shuttle is the most unhealthy vs your peers, you will be first in line to be redeem against.

This means that you risk losing some or all of your collateral.

How do I keep my shuttle safe from redemptions?

Since most unhealthy shuttles will get redeemed first, it is recommended that you always maintain a healthy collateral ratio, which is typically above 180%. This helps lower your probability of getting redeemed.