Redemption Shield

The Redemption Shield is opt-in protection from redemption. A trove with Redemption Shield enabled is guaranteed not to be redeemed against (except possibly during branch shutdown). You pay a higher borrow rate in return.

Redemptions use regular troves and skip troves with Redemption Shield enabled.

What's a redemption? Any RD holder can swap RD for collateral at par — the mechanism that keeps RD near $1 (see Redemption for the full picture). If your trove without Redemption Shield is near the front of the queue, some of its collateral is taken and an equal value of its debt is written off. It isn't a loss — your debt falls by the same amount, so your ICR barely moves — but it's an involuntary reduction in your collateral balance, on the protocol's timing, not yours. Redemption Shield lets you opt out.

What the shield does

Redemption Shield turns redemption protection into an explicit, priced choice. When someone redeems, the protocol claims collateral from troves without Redemption Shield only, starting with the lowest-ICR one; troves with Redemption Shield enabled are not touched at all in normal mode.

A redemption walks the base book from the lowest ICR up. The trove it hits gives up some collateral to the redeemer and has an equal value of debt written off at par — so its ICR barely moves; it's a forced partial repayment, not a loss. Troves with Redemption Shield enabled are skipped entirely (except during branch shutdown).

So if you'd rather pay a small premium than watch your queue position, enable Redemption Shield. If you want the cheapest possible borrow and you're comfortable being redeemed against when RD trades below par, keep it disabled.

The only path in which a trove with Redemption Shield enabled can be redeemed against is branch shutdown, where the protocol switches to a discount-based schedule that walks both books to clear the branch (see Shutdown redemption). In short: in normal mode, troves with Redemption Shield enabled are never redeemed against; in shutdown mode, they can be, on the shutdown discount schedule.

What it costs

If you enable Redemption Shield, your trove pays a surcharge on top of the branch rate. That surcharge is the visible "shield premium." It funds an equal-and-opposite discount to every trove without Redemption Shield on the same branch, the two halves of the same mechanism. The size of both halves depends on the branch's Redemption Shield share:

• If the Redemption Shield share is near zero, both the surcharge and the discount are tiny, protection is nearly free, and base troves see almost no benefit.
• As the Redemption Shield share of the branch grows, both halves grow: troves with Redemption Shield enabled pay more, while the effective rate for troves without it drops further below the branch rate. At the high end the base rate can go as low as roughly −50% APR (the _V_MAX floor) before the curve flattens.

Mechanically: troves with Redemption Shield enabled pay more than the branch rate; troves without Redemption Shield pay less. The Redemption Shield cohort subsidizes base troves.

Here is the whole schedule at a branch rate of 4% APY — both books' rates as a function of the branch's shield share:

Left of the 85% kink, protection is cheap and the base discount is modest. Past it, the shield is crowded: the surcharge accelerates and the base rate dives toward −50% APY. Explore other branch rates in the interactive version.

The full formula and constants are in Interest model. The user-side takeaway: the more crowded the shield is, the more it costs to enable, and the more attractive it is to keep Redemption Shield disabled. Both sides of the shield-share adjustment are visible on the dashboard.

Toggling

You can change your Redemption Shield setting, but not on demand — each change starts a cooldown before the next one is allowed. Toggle it on its own, or in the same transaction as a collateral/debt change.

Toggle cooldown. After any change to your Redemption Shield setting — including the choice you made when opening the trove — you must wait 24 hours before changing it again; an earlier attempt reverts. The clock is per-borrower and resets on each change. So the real rule is: at most one Redemption Shield change per 24 hours.

Internally the protocol moves your trove's collateral from one pool to the other. From your perspective it's one position; nothing changes about ICR, debt, or interest accrued.

Developer reference: Borrowing operations.

What redemption does to your trove

Important: getting redeemed against is not the same as being liquidated. Liquidation closes your trove and you lose the gas-comp reserve. Redemption is a forced partial close at par:

• The redeemer hands the protocol some RD.
• The protocol burns that RD against your trove's debt at par.
• The protocol sends the redeemer collateral worth that RD (at the oracle price), minus the redemption fee.
• Your trove ends up with less debt and less collateral, in proportions that keep your ICR roughly the same.

You lose some collateral exposure (the protocol picked the moment, not you), but you're not unwound. Many users are fine with that; some aren't. Redemption Shield exists for the second group.

Should I enable Redemption Shield?

• Enable Redemption Shield if you want to avoid redemption, prefer a hands-off position, and don't want to monitor queue depth.
• Keep Redemption Shield disabled if you want the cheapest rate the protocol offers and you understand redemption isn't a loss, it's a forced partial close at par.

Notes

• The Redemption Shield setting survives adjustments. Only an explicit toggle changes it.
• During the bootstrap period (14 days post-deploy), redemption is disabled regardless, so the setting has no effect. Choose whichever mode you prefer when opening.

Deep dive: Interest model, shield pricing. User view of redemption itself: Redemption.