Redemption Mechanism

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

Think of redemptions like a one-sided swap on a DEX. You can only swap $USC for $cdcETH, but not the other way around.

How It Works:

• 1 $USC can always be redeemed for USD 1 worth of collateral on Orby’s platform.

• This Redemption Mechanism helps maintain the $USC peg when its value falls below USD 1.

• Users can buy discounted $USC from the market and redeem it 1:1 for USD worth of the underlying collateral, helping to push the price back to peg.

• Orby’s Redeem page will show real-time $USC to cdcETH rate comparison from different sources so you can get the best redemption rate.

Key Points:

• Anyone can use redemptions, but a variable fee may apply.

  • The redemption fee changes based on the Base Rate and increases with each redemption event.

  • Typically, users redeem when $USC trades below peg to make it economically viable.

Redemption vs. Repayment:

• Repayment: You pay back your own $USC debt within your shuttle.

• Redemption: You swap $USC 1:1 for someone else’s collateral.

  • Collateral comes from the “unhealthiest” shuttles (those with the lowest collateral ratio) first.

Important: Redemptions are not the same as repaying one’s $USC debt.

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.