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Redemptions

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Last updated 4 months ago

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.

  1. Guaranteed Redemption Rate: Users can always redeem 1 ABD for 1 USD worth of ALPH, as long as the overall collateral ratio is greater than 100%. This ensures that the ABD peg is maintained through user-initiated redemptions. In the unlikely event that overall collateral ratio falls below 100%, the amount of collateral received through redemption is pro-rated in proportion to the overall collateral ratio, to prevent bank runs.

  2. Loan Repayment Sorting: During redemption events, all loans are sorted by the lowest interest rate. Users with loans having the lowest interest rater are prioritized for redemption.

  3. No Net Loss for Redeemed Users: Users whose loans are repaid through the redemption process will not experience a net loss. The Alph that is taken from their collateral is equal in value to the ABD that is being redeemed and used for repaying their loan. This balances their financial position.

By integrating this redemption mechanism, AlphBanX ensures the stability and reliability of ABD, protecting the platform from potential depegging events and maintaining user confidence.