Redemption Process and Liquidity
The Re Protocol offers a transparent and structured redemption process to ensure fair access to liquidity while safeguarding the stability of the Insurance Capital Layer (ICL). This process balances participant needs with the protocol’s financial health by tying redemption opportunities to both realized and projected returns from Risk Pools.
How the Redemption Process Works
Daily and Quarterly NAV Evaluation
Daily Projected NAV Updates: Every day at UTC 0, the protocol recalculates the projected Net Asset Value (NAV) for each ICL token. This projection reflects current earnings, anticipated returns from active reinsurance contracts, and yield from idle assets that are dynamically reallocated to the best yield-bearing opportunities.
Quarterly NAV Calculation: At the end of each quarter, a comprehensive NAV is calculated. This quarterly review incorporates realized returns from Risk Pools, yield from undeployed assets, and the overall collateralized value within the ICL. A redemption window is only opened when this NAV confirms that sufficient capital is available to support a redemption event.
Redemption Triggers: Redemptions are enabled only when both realized and projected returns validate the financial capacity of the ICL, ensuring sustainability for all participants.
Redemption Windows and Request Processing
Designated Redemption Windows: Redemption opportunities are evaluated quarterly. During a valid redemption window, participants can submit their redemption requests.
Submission and Queue Management: Requests are processed on a first-come, first-served basis. If there is insufficient capital to fulfill all requests, unfulfilled requests roll over to the next redemption period, maintaining the participant’s place in line.
Holding Period: A minimum holding period (e.g., 40 days) is required before tokens become eligible for redemption, promoting long-term stability.
Early Liquidity via DEX Partnerships
Early Redemption Options: Recognizing the need for faster liquidity access, the protocol is partnering with decentralized exchanges (DEXs) to enable early redemptions. Our initial DEX partner is Curve, a leader in stablecoin liquidity.
Mechanism for Early Liquidation: The protocol will leverage early returns and designated portions of the ICL to facilitate early redemptions through Curve pools. This mechanism allows participants to access liquidity ahead of the quarterly schedule while maintaining the overall stability of the ICL.
Seamless Integration: Early liquidity via Curve is integrated with our existing redemption framework. This ensures that even when tokens are redeemed early, the daily and quarterly NAV calculations continue to reflect both realized and projected earnings accurately.
Key Considerations
Liquidity Management: The protocol prioritizes maintaining adequate liquidity to honor redemptions without compromising the financial health of the ICL.
Transparency and Reporting: Participants can monitor real-time data on the projected and realized NAV, redemption status, and other key metrics through the protocol’s dashboard, ensuring complete transparency.
Equity and Fairness: The first-come, first-served system for redemption requests, along with the roll-over mechanism, ensures that all participants have equal opportunities to redeem their tokens under fair conditions.
This enhanced Redemption Process and Liquidity framework not only maintains robust financial stability but also offers participants flexible liquidity options through both scheduled redemptions and early liquidity mechanisms via Curve.
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