Shutdown redemption

When a branch is shut down, redemption against that branch switches to a different pricing schedule designed to clear the branch's debt quickly. Other branches keep operating on normal-mode redemption.

When this is relevant

You'll see shutdown-mode redemption if:

• A specific branch was shut down (triggered because its TCR fell below SCR, or because its price feed failed).
• The whole system is shut down (every branch in shutdown state).

In both cases you can still redeem on that branch, it's the primary path by which the protocol returns collateral to RD holders as the branch winds down. New borrows on a shut-down branch are blocked.

What changes vs. normal redemption

Three things:

1. Pricing. Normal mode uses the oracle price minus the redemption fee. Shutdown mode applies a time-based price multiplier to how collateral is valued — starting slightly against the redeemer and ramping steadily in their favor. The growing discount is what draws redeemers in to wind the branch down.
2. Troves with and without Redemption Shield can be redeemed. Normal-mode redemption walks only the base list. Shutdown-mode redemption can walk both cohort lists directly, on the same pricing curve.
3. Bootstrap period doesn't apply. Shutdown can happen after bootstrap, and shutdown-mode redemption is always available.

The discount schedule

The exact discount you get depends on why the branch was shut down and how long ago:

Trigger	Starting point	Maximum discount	Ramp window
TCR fell below SCR	1% premium	5%	1 day
Oracle failure	same first-day ramp	≈ 100%	14 days

Pricing starts at a 1% premium. Shutdown redemptions are not rate-limited by the redemption quota, so a discount that was instantly profitable would make forcing a shutdown a prize that scales with the size of the branch — the premium start removes that incentive. The first hour ramps quickly from the 1% premium to a 1% discount (crossing break-even about 30 minutes in); from that kink it continues more gently:

• A TCR-below-SCR shutdown reaches its 5% discount cap after one day and holds there. A 5% discount means the collateral you receive is valued 5% below oracle — about $105 of collateral per 100 RD at par.
• An oracle-failure shutdown follows the identical ramp for the first day, then keeps deepening toward ~100% at day 14. The branch has no reliable price, so the protocol lets redeemers accept ever-larger discounts — receiving ever more collateral per RD — until the branch clears.

TCR-below-SCR shutdown. Pricing starts at a 1% premium (×1.01) and falls fast: within the first hour it crosses break-even (≈ 30 minutes in) and reaches a 1% discount (×0.99). From that kink it ramps gently over the remaining 23 hours to a 5% discount (×0.95) at day one — then holds there. The premium start makes forcing a shutdown worthless, since shutdown redemptions bypass the quota.

Oracle-failure / blacklist shutdown. The first day is the identical ramp — 1% premium to a 1% discount inside the first hour, then 5% by day one — but with no trusted price the discount keeps deepening toward ~100% (×0) by day 14. The branch pays out whatever collateral remains to whoever clears its debt.

Both causes share the identical first day — a 1% premium at shutdown, a 1% discount by the end of the first hour, and a 5% discount by day one. A TCR-below-SCR shutdown then holds at 5%; an oracle-failure (or blacklist) shutdown keeps deepening toward ~100% by day 14, since the branch has no trusted price and pays out whatever collateral remains. Explore either with a cursor in Collateral shutdown.

What you do

Normal-mode redemption automatically excludes shut-down branches (they drop out of the basket weights), so a normal redemption call never accidentally hits one. To redeem from a shut-down branch, you (or your front end) target that branch's redemption path directly; it uses the same hints as normal redemption.

Developer reference: Redemption for the shutdown path and triggers.

Should you wait or redeem now?

For TCR-below-SCR shutdowns: redeeming after the one-day ramp completes gets you the maximum 5% discount. There's little reason to wait beyond that. The branch is clearing; getting out promptly is usually correct.

For oracle-failure shutdowns: this is a judgment call. Waiting longer gets you a bigger discount in your favor if you redeem first, but the branch may run out of redeemable collateral before you get there. The longer you wait, the worse the redeemer queue gets.

What if the discount eats too much?

For the first few hours after a shutdown, pricing sits at a premium: the payout is smaller than the RD you redeem. That's deliberate. Shutdown redemption bypasses the redemption quota, so an instantly profitable discount would reward whoever could force a shutdown — a prize that scales with branch size. The premium start makes a forced shutdown worthless to its instigator. Once the ramp crosses break-even (≈ 30 minutes in), the discount is in your favor and grows from there. The redemption walk also has a guard that aborts if the fee would consume the entire collateral leg.

The protocol's contract is: in shutdown, the branch will pay out whatever it can to clear debt, on this pricing schedule. If that's an unfavorable trade for you, don't redeem on that branch, sell RD elsewhere or wait. Other branches may still be operating normally.

Deep dive

Collateral shutdown covers the full trigger surface, the cross-branch effects, and how the Aggregator excludes shut-down branches from issuance quotas, drips, and basket weights.