> For the complete documentation index, see [llms.txt](https://docs.hliquity.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.hliquity.org/deep-dive/redemptions-and-hchf-price-stability.md). # Redemptions and HCHF Price Stability ### Introduction to Redemptions Redemptions are a unique feature of the HLiquity protocol. They allow any holder of HCHF to exchange their tokens for HBAR at face value, effectively ensuring the stability of HCHF. This mechanism is crucial in maintaining the peg of HCHF to the Swiss Franc. ### How Redemptions Work When a user initiates a redemption, they specify the amount of HCHF they wish to redeem. The protocol selects the Trove with the lowest collateral ratio and uses its collateral to fulfill the redemption. The redeemed HCHF is burned, and the corresponding amount of HBAR is transferred to the redeemer. ### Impact on Troves Redemption directly impacts Troves with the lowest collateral ratios. When a redemption occurs, the debt of the affected Trove decreases, and an equivalent amount of its collateral is claimed. This process continues until the entire redemption request is filled. ### HCHF Price Stability The redemption mechanism plays a crucial role in maintaining the stability of the HCHF price. If the market price of HCHF drops below its peg, users can buy HCHF cheaply on the market and redeem it for HBAR at face value, making a profit. This arbitrage opportunity incentivizes market participants to restore the peg. ### Redemption Fee A redemption fee is applied to each redemption to compensate for the risk taken by the Trove owners. The fee is dynamic and depends on the amount of HCHF being redeemed relative to the total HCHF supply. The fee is added to the redeemed HCHF and is paid in HBAR. ### Conclusion The redemption mechanism is a powerful tool that ensures the stability of the HCHF peg. By understanding how redemptions work and their impact on Troves, users can make informed decisions and effectively manage their interaction with the HLiquity protocol. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.hliquity.org/deep-dive/redemptions-and-hchf-price-stability.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.