Redemption — what it means for you

Redemption is the mechanism that puts a floor under the price of fyUSD. Any holder can hand fyUSD to the protocol and receive collateral worth the same amount at the oracle price. The fyUSD is burned and somebody's debt goes down by the same figure.

That somebody is a borrower who did not choose the moment. This page is about being that borrower.

What actually happens to your position

Say you have 100 SPY as collateral, $50,000 at $500 a token, and a debt of 25,000 fyUSD. A redeemer sends 5,000 fyUSD and your position is next in the queue.

You lost 9.9 SPY and 5,000 of debt — an even exchange at oracle price. Your ratio went up, your liquidation price went down, and the 0.5% fee that the redeemer paid stayed inside your collateral rather than leaving with them.

Rules R-7.4.1, R-7.4.2

What you actually lose

Exposure, not money. You wanted 100 SPY of upside and you now have 90.1. If SPY rises 10% afterwards you gain $4,505 instead of $5,000.

For a borrower who opened the position because they did not want to sell, that is the real cost, and it is the reason to care about the queue.

Who gets redeemed first

Positions are walked in ascending order of the rate their owner chose. The cheapest borrower pays first, in exposure. It is the price of paying less interest, and it is the whole reason the rate is yours to set.

Four kinds of position are skipped entirely:

• Positions whose collateral ratio is under the liquidation threshold — those are for liquidators, not redeemers.
• Positions opened less than 24 hours ago.
• Positions already reduced below the minimum debt.
• Positions on any branch that is not currently redeemable.

Rules R-7.3.1, R-7.1.1

When redemption costs more, and when it is unavailable

Redemption works at every hour. What changes outside the session is the price and the fee: the redeemer is served at the higher of the last official print and the on-chain price, and pays up to 2% on top of the 0.5% floor and the base rate as the protocol's confidence falls.

It is refused only when there is no usable price at all — an oracle paused for a corporate action, a broken feed, a circuit condition, the sequencer down — or when the branch is shut down or frozen for redemption by the Closer.

The PSM remains the other exit, at every hour, in every regime, and its exit cannot be paused.

That is a deliberate trade: fewer moving parts outside the session, one rule that fits in a sentence, and a swap module that does the same job without needing a fresh equity price.

How much a redemption costs the redeemer

Redeeming $200,000 against a $4M supply adds 5 points to the base rate, taking the fee to 5.5% and making further redemption uneconomic until it decays — 2.75% six hours later, 1.4% twelve hours later. Size is self-limiting.

Rule R-7.5.1

Staying out of the queue

Three things you can do, in order of directness:

1. Raise your rate. One click. You move backward past every position paying less than your new number. It costs you the higher rate, plus seven days of interest if your last change was inside the cooldown window.
2. Delegate. Authorise the conservative manager — median rate plus 1 point — inside a band you choose, and let it track the branch. See Interest rate and delegation.
3. Repay. A smaller debt is a smaller target, and full repayment removes you from the queue entirely.

The interface shows your distance to the front in both positions and fyUSD, and notifies you in real time when you come within 5% of it.

Rules R-15.1.7, R-15.3

Redemptions after a shutdown

If a branch has shut down, or the protocol has entered Sunset, a different function applies: urgentRedeem. The redeemer picks the positions, receives collateral at the last accepted price plus a 2% bonus, and pays no fee. There is no queue and no ordering.

Last reviewed: 2026-09-07 · Spec v0.4