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Minting and Redeeming
To mint new USDs, minters only need eligible collateral. Currently, the protocol is accepting USDC.e, USDC, Frax, DAI, USDT, LUSD as collateral and more tokens might be added to this list in the future. Please note, that VST token is not collateral anymore: it has been removed, following Vesta Finance's protocol sunset decision. However, USDs tokens are fungible and redeemable in the same way, independent of their underlying minting collateral. It acts as an IOU on the pooled collateral.
The protocol will mint 1 USDs by collecting 1 USD worth of collateral.
Collateral tokens required = No. of USDs tokens minted/Price of collateral in USD
When a collateral token is worth less than 1 dollar, it will be treated with its actual market price. However, when it is worth more than 1 dollar, it will be treated as 1 dollar. Hence, USDs will always be fully collateralized or over-collateralized.
Mint fees are subject to Sperax DAO approval.
Redeeming 1 USDs at the protocol level gives the user back any one unit of collateral (maximum 1 unit of collateral) after deducting the redemption fee. Redeemers can choose from the list of eligible collaterals that they want to receive. A portion of USDs redeemed is collected as a redemption fee by the protocol.
The protocol will redeem 1 USDs following this simple equation:
Fee = x% of USDs amount redeemed. 'x' depends on the selected collateral.
Collateral tokens redeemed = (1-x)% * (No. of USDs redeemed)
When a collateral token is worth more than 1 dollar, it will be treated with its actual market price. However, when it is worth less than 1 dollar, it will be treated as 1 dollar. Hence, USDs will always be fully collateralized or over-collateralized.
The aggregate collateral ratio (or CR = Total Value Locked/USDs Circulating Supply) should be close to 100% as USDs are backed by stablecoins and collateral is expected to hold their price even in situations of market volatility. However, in an extreme situation if the value of locked collateral changes and the collateral ratio drops by more than 10%, the protocol will be paused manually. Redemptions will begin based on governance or if the collateral ratio increases. To cover any gaps in collateralization SPA reserves from Treasury may be used by the protocol.
Redemption fees are subject to Sperax DAO approval. The current redemption fees are: USDs redemption for Frax, VST, or DAI - 0.2%, USDs redemption for USDC - 0.5%.