How LUSD Redemptions in Liquity work

Written by Nikola M.
Updated 1 month ago

Liquity protocol keeps an on-chain list of Troves sorted by collateralization ratio.

To ensure a hard USD peg, the redemption mechanism allows anyone to redeem 1 LUSD for $1 of ETH at any time. The ETH is taken from the riskiest (least collateralized) Trove(s) by paying back their debt with the LUSD being redeemed.

Keep in mind that this action can be performed at any time, but it's only profitable if the LUSD market price is below $1.

Read the full documentation on LUSD redemptions here.

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