> For the complete documentation index, see [llms.txt](https://weissfi.gitbook.io/weissfi-documentation/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://weissfi.gitbook.io/weissfi-documentation/redemption-mode.md).

# Redemption Mode

## **What Are Redemptions?**

Redemptions are a key mechanism that helps **maintain WEIS’s peg to $1** without relying on centralized assets or third parties.

A redemption allows a user to **swap WEIS for SUI at face value** (1 WEIS = $1 worth of SUI). This means that when the price of WEIS falls **below $1**, arbitrageurs can redeem their WEIS for SUI, reducing WEIS supply and helping restore its peg.

**How It Works:**

* The **redeemer** sends WEIS to the protocol.
* In return, they receive SUI **minus a small redemption fee**.
* Redemptions start with borrowers with the **lowest collateral ratio**.

This mechanism ensures **market-driven stability** while protecting the peg of WEIS.

***

## **How Do Redemptions Affect Borrowers?**

When a redemption occurs, **a portion of a borrower's collateral is used to process the redemption**, but their loan balance is also reduced accordingly. This means that even if part of their SUI is redeemed, they owe **less WEIS** than before.

**Example**

* **Before Redemption:** 10,000 SUI collateral, 5,000 WEIS borrowed.
* **After Redemption:** 9,500 SUI collateral, 4,750 WEIS borrowed.
* **Redemption Fee:** 2.5% (borrower keeps a small portion of their SUI).

💡 **Borrowers do not lose funds in USD terms**—redemptions simply adjust the collateral and debt proportionally.

***

## **Redemption Fees**

A **small redemption fee** is applied, ensuring the system remains balanced. This fee is based on the **amount of WEIS redeemed and recent redemption activity**.

* Fees start at **0.5% and decay over time** if redemptions slow down.
* Unlike other systems, **borrowers keep the redemption fee**, making redemptions fairer for all users.

💡 **If WEIS is trading at or above $1, redemptions are unlikely to occur.**

***

## **How to Protect Yourself from Redemptions**

The risk of being redeemed depends on:

1. **Your Interest Rate** – Borrowers with the **lowest** rates are redeemed first.
2. **The Price of WEIS** – If WEIS is above $1, redemptions are unprofitable and won’t happen.

To reduce your risk:

* **Set a higher interest rate** – This places you further down in the redemption queue.
* **Monitor redemption activity** – Stay informed on the amount of WEIS being redeemed.

***

## **To Summarize**

* **Redemptions** keep WEIS stable and **are only likely when WEIS falls below $1**.
* **Borrowers repaid through redemptions do not lose USD value**, only their **debt and collateral adjust proportionally**.

By understanding these mechanics, users can **strategically manage borrowing and minimize redemption risks.**