Redemptions and xUSD Price Stability

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How does xUSD closely follow the price of USD? 
The ability to redeem xUSD for $MATIC at face value (i.e. 1 xUSD for $1 of $MATIC) and the minimum collateral ratio of 110% create a price floor and price ceiling (respectively) through arbitrage opportunities. We call these "hard peg mechanisms" since they are based on direct processes. 
xUSD also benefits from less direct mechanisms for USD parity — called "soft peg mechanisms". One of these mechanisms is parity as a Schelling point. Since xDollar treats xUSD as being equal to USD, parity between the two is an implied equilibrium state of the protocol. Another of these mechanisms is the borrowing fee on new debts. As redemptions increase (implying xUSD is below $1), so too does the baseRate — making borrowing less attractive which keeps new xUSD from hitting the market and driving the price below $1. 
What are redemptions?
Users can redeem their xUSD for $MATIC at any time without limitations. However, a redemption fee might be charged on the redeemed amount.
Is a redemption the same as paying back my debt? 
No, redemptions are a completely separate mechanism. All one has to do to pay back their debt is adjust their Trove's debt and collateral. 
How is the redemption fee calculated?
Under normal operation, the redemption fee is given by the formula baseRate * Maticdrawn
How is the baseRate calculated?
Redemption fees are based on the baseRate state variable in xDollar, which is dynamically updated. The baseRate increases with each redemption, and decays according to time passed since the last fee event - i.e. the last redemption or issuance of xUSD.
Upon each redemption:
baseRate is decayed based on time passed since the last fee event
baseRate is incremented by an amount proportional to the fraction of the total xUSD supply that was redeemed
The redemption fee is given by baseRate * Maticdrawn
As a borrower, do I lose money if I'm redeemed against? 
If your Trove is redeemed against, you do not incur a net loss. A redemption is the process of exchanging xUSD for $MATIC at face value, as if 1 xUSD is exactly worth $1. That is, for x xUSD you get x dollars worth of $MATIC in return. However, you will lose some of your $MATIC exposure. Your Trove's collateral ratio will also improve after a redemption. The Trove will be closed due to redemption if the debt left after redemption is less than 50 xUSD (polygon) or 20 xUSD (avalanche) or 50 xUSD (Arbitrum), in which case the Liquidation Reserve will be used to cancel the debt. 
How can I avoid being redeemed against? 
The best way to avoid being redeemed against is by maintaining a high collateral ratio relative to the rest of the Trove's in the system. Remember: The riskiest Troves (i.e. lowest collateralized Troves) are first in line when a redemption takes place. 

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Contents

How does xUSD closely follow the price of USD?

What are redemptions?

Is a redemption the same as paying back my debt?

How is the redemption fee calculated?

How is the baseRate calculated?

As a borrower, do I lose money if I'm redeemed against?

How can I avoid being redeemed against?