> For the complete documentation index, see [llms.txt](https://docs.hann.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.hann.finance/protocol/redemptions-and-risk.md). # Redemptions Redeem USDHN for collateral, understand the fee, and manage the effect on a Trove Redemption exchanges USDHN for collateral through Hann Finance. The protocol reduces borrowers’ debt, sends collateral to the redeemer, and burns the USDHN used. A borrower’s position becomes smaller even though the borrower did not submit a repayment. ![USDHN leaves the holder's wallet and KAIA collateral returns to it. The borrower's Trove loses debt and collateral, while the fee remains in the Trove.](https://2221521122-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F8nyFCptMbCTgKUyVYlHX%2Fuploads%2Fgit-blob-eff5489aa0b1d1b5dceff8a49cca57359ff0a37d%2Fredemption-overview.png?alt=media) *Debt and collateral decrease together. The redemption fee stays in the affected Trove.* ## Redemption, repayment, and liquidation | Action | Who initiates it | Result | | ----------- | -------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | | Repayment | The borrower | USDHN reduces the borrower’s own debt. Closing the Trove releases its collateral. | | Redemption | A USDHN holder | The protocol selects Troves, reduces their debt, and transfers collateral after the fee to the holder. | | Liquidation | A liquidation caller | A Trove below its minimum collateral ratio is closed. Its debt and collateral go through the Stability Pool and redistribution paths. | A normal redemption can affect a Trove above its liquidation threshold. ## Why holders redeem Buying USDHN below $1 and redeeming it exchanges discounted USDHN for collateral priced by the protocol. Buying creates demand; burning the redeemed USDHN reduces supply. The result of this trade depends on the redemption fee, gas, and the market price received for the collateral. The protocol’s collateral price and the price available in a market can differ. ## How the protocol selects Troves Selection happens in two stages: 1. **Across branches:** CollateralRegistry allocates the redemption by each eligible branch’s debt that exceeds its Stability Pool deposits. If all eligible branches have zero excess debt, allocation uses their total debt. 2. **Within a branch:** the TroveManager first checks a recorded small-debt Trove left from a previous redemption, then traverses Troves from the **lowest annual interest rate upward**. Troves below a 100% collateral ratio at the normal oracle price are skipped. A branch must be active, have no shutdown recorded, and have a total collateral ratio at or above its shutdown threshold (`SCR`) to receive a normal redemption allocation. The redeemer receives the collateral resulting from this allocation. The app’s redemption form has no single-collateral selection. ## What changes for borrowers For each redeemed portion: * Debt decreases by the USDHN amount used against the Trove. * Collateral decreases by the amount sent to the redeemer. * The collateral charged as the redemption fee remains in the Trove. * The annual interest rate stays unchanged. If debt falls below the branch’s minimum debt, the contract marks the Trove as `zombie` and removes it from the normal redemption list. Remaining collateral stays in the Trove, including when the debt reaches zero. The borrower can close the Trove to recover it. A higher interest rate places a Trove later in the normal redemption order and increases borrowing costs. Rate changes and manager settings affect this trade-off. Collateral price changes and further borrowing continue to affect the collateral ratio after redemption. ## Redeem in the app 1. Keep USDHN and gas-paying KAIA in your wallet. 2. Open **Swap** and select **Redeem**. 3. Enter the USDHN amount and **Max redemption fee**. 4. Review the estimated fee and the collateral tokens to be received. 5. Submit the redemption and sign in your wallet. 6. After confirmation, check the actual USDHN burned and collateral received. The current app calls CollateralRegistry directly: ```solidity redeemCollateral( uint256 _usdhnAmount, uint256 _maxIterationsPerCollateral, uint256 _maxFeePercentage ) ``` The app passes `0` for the iteration limit, which removes the per-branch traversal cap. The registry burns the caller’s USDHN directly; this route has **no USDHN approval step**. Fee percentages use 18-decimal fixed-point values. For example, a 1% maximum is `10_000_000_000_000_000`. The accepted maximum must be between the contract’s fee floor and 100%. If the transaction’s calculated fee exceeds this maximum, it reverts. The executed amount can be smaller than the requested amount because of branch allocation, available Troves, or an iteration limit. The direct route burns the amount actually redeemed, so unused USDHN stays in the wallet. Transaction success and full execution of the requested amount are separate outcomes. ## Manual redemption and helper contracts Use the contract address and ABI for the selected network in [Smart Contracts](/developers/smart-contracts.md). Kaia and Kairos use different chains and deployment profiles. A direct call to `CollateralRegistry.redeemCollateral` follows the app flow above. A call to `RedemptionHelper.redeemCollateral` also takes `_minCollRedeemed`, an array of minimum collateral outputs in the helper’s branch order. The helper transfers USDHN from the wallet and therefore requires a USDHN allowance. It forwards collateral to the caller and refunds unused USDHN. The helper and direct registry routes have different inputs and approval requirements. [Redemptions Deep Dive](/mechanics/deep-dives/redemptions.md) covers the fee formula, branch allocation, and numerical effects on collateral ratios. ## Execution conditions Normal redemptions depend on eligible branches and working price feeds. A branch below `SCR` or already shut down is excluded from normal allocation. A shut-down branch has a separate `urgentRedemption` path. Selling the received collateral depends on market liquidity. [Borrowing & Liquidation](/protocol/borrowing-and-liquidation.md) covers position management; [Risk Disclosure](/security/risk-disclosure.md) covers market, contract, and oracle risks. --- # 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. 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