# Redemptions

**The Redemption Mechanism in AlphBanX**

In AlphBanX, the redemption mechanism allows users to redeem ABD stablecoins for ALPH to maintain ABD’s 1:1 peg to USD.

<figure><img src="/files/SaDaaY8PXTFdlV1jDqkB" alt=""><figcaption></figcaption></figure>

1. **Guaranteed Redemption Rate:** Users can always redeem 1 ABD for $1 worth of ALPH, as long as the protocol-wide collateral ratio is above 100%. This mechanism ensures ABD remains fully backed and stable. In the unlikely event that the overall CR drops below 100%, redemption becomes partial and proportional — meaning the user receives less ALPH, in line with the protocol’s remaining collateral. This helps prevent mass liquidations or panic redemptions.
2. **Loan Repayment Sorting:** When redemptions are triggered, loans are sorted and repaid starting from those with the lowest interest rates. This prioritization ensures that less profitable loans for the protocol are redeemed first, maintaining economic efficiency.&#x20;
3. **Loan Source Clarification:** The ABD used in redemptions is burned, and the protocol repays the corresponding loan using the borrower’s ALPH collateral. This repayment reduces the borrower’s outstanding debt and removes that loan from the system.
4. **No Net Loss for Redeemed Users:** Users whose loans are force-redeemed will not suffer a net loss. The amount of ALPH taken from their collateral matches the ABD value used for repayment. The user simply ends up with fewer outstanding liabilities, balancing their financial position without penalty.

*The borrower does not incur a net loss during redemption — the ALPH removed from their vault is equal in value to the ABD burned, ensuring their financial position remains balanced.*

<figure><img src="/files/1UYjpjz7uAcqyKyPu8nW" alt=""><figcaption></figcaption></figure>

By integrating this redemption mechanism, AlphBanX ensures the stability and reliability of ABD, protecting it against depegging risks and reinforcing user confidence in volatile markets.


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