Redeem

How It Works:

DracoFi allows users to redeem their staked $DRACO tokens in exchange for SOL, either at a fixed rate or a variable rate.

• Fixed Rate: Users can redeem their staked $DRACO at a stable rate backed by the treasury, offering more security.

• Variable Rate: Users can redeem at a rate that changes every epoch, based on several factors, including the current market price, the percentage of $DRACO in the treasury, the percentage of staked $DRACO, and the percentage of SOL in the treasury.

Redemptions are unlocked linearly over 10 epochs.

Benefits for Users:

The redeem mechanism provides users with flexibility. They can choose a fixed rate if they prefer stability or opt for a variable rate if they are willing to take on more risk for higher potential rewards. The gradual unlocking of tokens ensures users benefit from a steady value increase, while avoiding the risks associated with sudden market movements. It also allows users to plan their redemptions based on their financial goals, balancing liquidity and long-term returns.

Benefits for DracoFi:

The redeem system supports the protocol by maintaining stability in the market. By allowing redemptions at different rates and staggering the unlock periods, it reduces the chances of large-scale sell-offs and minimizes sell pressure.

Additionally, redeemed tokens are partially burned, contributing to a deflationary effect that supports the token's value over time. This mechanism also helps balance the treasury, maintaining an ideal asset mix between $DRACO and SOL.