How iUSD Works

Optimal usage of Ironclad is directly correlated to optimal understanding of the iUSD token, why it matters, and how different market conditions can impact its use cases.

The iUSD Peg

While iUSD mechanics establish a soft peg to the US dollar, its true value lies in a range between $0.995 and $1.05. The reason for this is due to the minting and redemption features available to iUSD holders.

When iUSD is Below $1…

Each iUSD token can be redeemed for $1 worth of collateral from the Ironclad smart contracts. This operation is called a Redemption, and incurs a 0.5% fee (scales up with high volume) which is sent to the Staking Pool.

Redemptions are handled almost entirely by bots within seconds of iUSD dipping below peg. For this reason, they are only executed directly at the smart contract level.

Redemptions are different from withdrawals or repayments, as they can be performed by users whether they have an open position or not. This makes arbitrage when iUSD is below $1 very profitable.

When iUSD is Above $1…

When iUSD rises above $1, minting it becomes progressively cheaper. This is because Ironclad values each iUSD token as $1 at time of issuance. This means that when iUSD is valued at $1.05 on an external DEX, every $100 of iUSD minted nets an extra $5.

The stability pool is able to close unhealthy debt positions within Ironclad for a profit to ensure it remains fully collateralized. Arbitrage efficiency and liquidation bonus mean that iUSD price may range slightly, but it should never deviate excessively from $1 without effectively being able to restore itself.

If you still have any questions, please reach out to the Ironclad team in our official Discord.