What is a Redemption?
Quick Definition
Redemption is the process of exchanging a stablecoin for its underlying value (typically fiat currency) directly with the issuer.
Full Definition
Redemption is the mechanism that connects a stablecoin to its real-world backing. Without reliable redemption, the link between the token and its reference value becomes purely theoretical. Strong redemption rights act as a structural anchor: if the token's market price drops below its reference value, arbitrageurs can buy it at a discount and redeem it at face value, restoring the price.
What to look for in redemption terms
Redemption terms vary widely between issuers. Some allow any holder to redeem at any time. Others restrict redemption to whitelisted, KYC-verified institutional clients. Minimum redemption amounts, fees, processing times, and eligibility requirements all matter. Weak, restricted, or unreliable redemption access has historically been a red flag for stablecoin quality, and is one of the key indicators institutional investors look at when evaluating a stablecoin.
How redemption works with Steady
Qualified institutional investors can redeem STDY directly through us, subject to KYC requirements and applicable terms. Redemption is available without lock-up or staking requirements. STDY is also available through public liquidity pools on supported blockchain networks, providing a secondary market option for users who do not qualify for, or prefer not to use, primary market redemption.
Related Terms
Depeg
ReadA depeg occurs when a stablecoin's market price deviates significantly from its intended reference value, failing to maintain its expected price.
KYC
ReadKYC (Know Your Customer) is the process by which financial institutions verify the identity of their customers as part of regulatory compliance.
Liquidity
ReadLiquidity refers to how easily an asset can be bought, sold, or converted into cash without significantly affecting its price.
Minting & Burning
ReadMinting is the process of creating new tokens; burning is the process of permanently removing tokens from circulation.
Peg
ReadA peg is the fixed reference value a stablecoin is designed to track, typically a fiat currency like the US dollar.
Redemption Infrastructure
ReadRedemption infrastructure refers to the systems, processes, and partners that enable holders to exchange their tokens for the underlying value.
Reserves
ReadReserves are the total pool of assets held by a stablecoin issuer to back the tokens in circulation.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
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