6️⃣Redeem USDEFI - Get BNB
Last updated
Last updated
DCNTRL Protocol allows for instant redemptions, a process where users can exchange their USDEFI for BNB at face value at any time. This feature provides users with a reliable exit strategy and a way to recover their collateral in case they need it.
Redemptions play a crucial role in maintaining the stability of USDEFI. By allowing users to redeem their USDEFI for BNB at face value, the protocol ensures that USDEFI maintains a stable value relative to the US dollar. This feature is particularly beneficial in times of market volatility, as it provides users with a safe and reliable way to exit their positions.
1️⃣ Price Stability
One of the most vital roles of redemptions is to help maintain the peg of the USDEFI stablecoin to $1. If the market price of USDEFI falls below $1, redemptions offer an arbitrage opportunity. Arbitrageurs can buy USDEFI at a discount and redeem it for $1 worth of BNB collateral, effectively reducing the supply of USDEFI and pushing its price back towards the peg.
2️⃣ System Health
Redemptions contribute to the overall health and stability of the DCNTRL Protocol by targeting the riskiest loan positions first. When a user redeems USDEFI, the protocol uses those tokens to repay the debt of the riskiest loan positions, thereby reducing systemic risk. This mechanism ensures that the protocol remains robust even if individual users fail to maintain adequate collateral.
3️⃣ User Flexibility
For USDEFI holders, redemptions offer a way to exit their positions in a straightforward manner. They can redeem their USDEFI tokens at face value for BNB collateral without having to go through an exchange. This provides an additional layer of flexibility and options for users to manage their assets.
4️⃣ Fee Generation
Redemptions typically incur a fee, which serves as an additional revenue stream for the protocol and Stability Pool providers. These fees can be dynamically adjusted based on system parameters, ensuring that they serve as either an incentive or a disincentive for redemptions, depending on the system’s needs at any given time.
If you mint USDEFI on DCNTRL you could potentially be redeemed against. While these seems bad at first being subject to a redemption isn’t in reality. You’ll just lose some of your BNB exposure while receiving a lesser debt burden. However, it’s possible for your loan position to be “fully redeemed,” meaning your debt is entirely paid off in return for a corresponding amount of collateral. In such cases, your loan position will be closed, and any surplus collateral will be sent to a pool where you can claim it.
To minimize the risk of being affected by redemptions, you can monitor your CR and position among loan positions and adjust accordingly.
The DCNTRL Protocol offers a “Risky Mints” section where you can easily monitor your place in line. Maintaining a Collateral Ratio above the minimum required level is generally recommended.
Redemptions will always redeem the Debt for the riskiest loan positions first
If you notice you are near the top of the list we suggest adjusting your Collateral Ratio (CR). This can be done by supplying more BNB collateral or reducing your USDEFI. As a rule of thumb, a CR of 200–250% should provide adequate room to prepare you for any potential crypto volatility. By altering your CR you can manage your risk and avoid being negatively impacted by redemptions.
