Unveiling Redemptions: A Dive into GRAI Hard Peg Mechanism
As Gravita Protocol celebrates crossing the 20M Total Value Locked (TVL) milestone, it’s an opportune time to delve into the details of one of our core hard peg mechanisms — Redemptions. This crucial feature ensures a stable, secure, and efficient borrowing experience for our GRAI users.
What are Redemptions?
Redemptions are a feature of Gravita Protocol that was forked from Liquity, with a few important changes.
At it’s core, it allows GRAI holders to redeem other user’s collateral at a specific rate. This mechanism is designed to reduce the volatility of GRAI and assist borrowers in maintaining a healthy Loan-to-Value (LTV) ratio.
In essence, Redemptions serve as a safety net for the system, ensuring that the value of GRAI remains stable and that the protocol continues to function smoothly even in volatile market conditions.
How do Redemptions work?
The Redemption mechanism is designed to prioritize the riskiest Vessels (those with the lowest collateralization) in the system. This means that borrowers who maintain a low LTV ratio relative to other Vessels are less likely to face redemptions.
When a Redemption occurs, GRAI holders can redeem other user’s collateral at a specific rate. Initially, this rate is set at 0.98:1, providing a slight discount to the GRAI holder and incentivizing the redemption process.
Upcoming Redemption Schedule
We’re excited to announce that redemptions will be going live on Tuesday, July 18th with a 0.98 parameter, and on August 18th with a 0.99 parameter.
This gradual increase in the redemption rate is designed to provide a smooth transition for our users and to allow for potential arbitrage plays, given that the current GRAI price is 0.984.
If you want to read more about Redemptions, check our documentation.
Conclusion
As Gravita Protocol continues to grow and evolve, we remain committed to providing a reliable and efficient decentralized borrowing platform for our users. The Redemption mechanism is a key part of this commitment, ensuring stability, security, and efficiency for all GRAI users.
Stay tuned for more updates as we continue to expand and improve our offering. The journey is just getting started, and we’re excited to have you with us!
