Redemptions and USDs Price Stability

Redemptions

A redemption mechanism is implemented to support USDs’ $1 soft peg. As soon as USDs goes under peg, there is an incentive for arbitrage traders to buy USDs on the open market and redeem against collateral of the Chest(s) with the lowest collateral ratio. This arbitrage creates demand for USDs and brings it back to peg. Users have the flexibility to redeem their USDs at any time without limitations. It's important to note that a redemption fee may be applied to the redeemed amount. For instance, if the current redemption fee is 1%, and the price of $artMETIS is $500, redeeming 100 USD would result in receiving 0.198 $artMETIS (0.2 artMETIS minus a redemption fee of 0.002 artMETIS). Keep in mind that the redeemed amount is considered when calculating the base rate and may impact the redemption fee, particularly for larger amounts. The redemption fees go directly to the $STS stakers.

The riskiest Chests (i.e. lowest collateralized Chests) are always first in line when a redemption takes place. Fees

USDs peg mechanisms

Hard Peg Mechanisms:

• Redemption at Face Value: Users can redeem 1 USDs for $1 of collateral assets (e.g., artMETIS), ensuring USDs value stability through arbitrage opportunities.

• Minimum Collateral Ratio: A 125% collateral ratio sets a price ceiling, deterring USDs from exceeding $1.25.

Soft Peg Mechanisms:

• Schelling Point: The community collectively views USDs as equivalent to USD, creating a psychological price stability.

• Borrowing Fee Adjustment: As USDs redemptions increase, indicating a price drop below $1, the borrowing fee baseRate rises, making borrowing less attractive and preventing excess USDs circulation, thereby supporting the peg.