Redeeming

Redeeming lets you exchange PUSD directly for BCH at face value. This mechanism is central to how ParyonUSD maintains its $1 peg — it creates a price floor that prevents PUSD from trading significantly below $1.

How redemptions work#

1. You specify how much PUSD to redeem
2. The protocol selects loans to redeem against, starting with the lowest interest rate
3. Your PUSD is burned and you receive BCH collateral from those loans
4. A 0.5% penalty is deducted from the payout to account for price movement since the last oracle update

Approximate payout = PUSD amount / (BCH price × 1.005)

The exact payout is determined on-chain using a redemption price locked at the time of the transaction.

Redemptions are trustless — the smart contracts handle everything on-chain without any intermediary.

Why redemptions exist#

Redemptions are the primary mechanism that keeps PUSD pegged to $1. Here’s how:

If PUSD trades at $0.98 on the open market, you can buy 100 PUSD for $98 and redeem it for $100 worth of BCH (minus the 0.5% penalty). That’s roughly $1.50 profit per 100 PUSD. This arbitrage opportunity creates buying pressure on PUSD, pushing the price back toward $1.

If PUSD trades at or above $1, there’s no incentive to redeem — you’d be better off selling PUSD on the market directly.

The redemption process#

Multiple transactions#

Redemptions may require multiple transactions. Each transaction redeems against a single loan. If your redemption amount exceeds the debt of the first targeted loan, additional transactions are created to redeem against subsequent loans.

The app handles this automatically — you’ll see a multi-step progress view showing each transaction as it processes.

Confirmation time#

Each redemption transaction requires 12 block confirmations before it finalizes (approximately 2 hours). During this window, the targeted loan’s collateral is locked but not yet transferred to you.

This confirmation period exists to allow the protocol to verify that the redemption targeted the correct loan (the one with the lowest interest rate). If a lower-rate loan exists, the target can be swapped during this window.

Minimum amount#

The minimum redemption amount is approximately 0.50 PUSD.

For borrowers: being redeemed against#

If you have an active loan, it’s important to understand how redemptions affect you.

Who gets redeemed first#

The protocol always redeems against loans with the lowest interest rates first. If you set a 2% rate and someone else has a 5% rate, your loan is targeted before theirs.

What happens to your loan#

When your loan is redeemed against:

• Your BCH collateral is reduced by the amount of BCH sent to the redeemer
• Your PUSD debt is reduced by the same dollar amount
• Your loan key NFT remains valid — the loan still exists with reduced collateral and debt

In dollar terms, the collateral removed is approximately equal to the debt reduced. You don’t lose significant money — but you lose BCH exposure, which matters if you’re bullish on BCH.

Example#

You have a loan with 1 BCH collateral ($500) and 300 PUSD debt. Someone redeems 100 PUSD against your loan. The on-chain redemption price is 0.5% below the oracle price ($497.50), so approximately 0.201 BCH is extracted:

	Before	After
Collateral	1 BCH ($500)	~0.799 BCH (~$399.50)
Debt	300 PUSD	200 PUSD
LTV	60%	~50.1%

Your LTV improved, but you lost ~0.201 BCH of collateral. If BCH later rises to $600, that lost collateral would have been worth ~$120.60.

How to protect yourself#

• Set a higher interest rate to move further back in the redemption queue
• Use managed rates to let the protocol automatically adjust your rate based on market conditions
• Monitor the protocol — if many low-rate loans exist ahead of you, your redemption risk is lower

See the Borrowing guide for more on interest rate strategy.

Risks#

Price movement during confirmation#

The 0.5% penalty is designed to account for BCH price movement between the last oracle update and your redemption. If BCH moves significantly during the ~2 hour confirmation period, the effective exchange rate may differ from what you expected. The penalty cannot be avoided.

Period turnover window#

For roughly the last ~2 hours of each daily period (the last 12 blocks of every 144-block period), the redemption interface is disabled. A redemption started inside this window would not finalize before the period ends and would be cancelled by the contract, so this frontend hides the redeem form during the window and shows a notice with the number of blocks until it reopens. The form becomes available again automatically when the next period starts.