> For the complete documentation index, see [llms.txt](https://usdu.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://usdu.gitbook.io/docs/risk-management/redemption-liquidity.md).

# Redemption Liquidity

$USDu and $sUSDu are designed for **high liquidity and easy redemption**, without relying on user-provided liquidity pools.

**Redemption Mechanism:**

* Users can acquire $USDu on decentralized markets (e.g. Curve, Balancer) or by borrowing $USDu in supported lending markets.
* Users can deposit $USDu into the **$USDu Lending Vault** to receive $sUSDu.
* **$sUSDu can always be redeemed for $USDu** from the vault, as long as there is sufficient liquidity remaining in the vault.

**What happens if liquidity is tight?**

* If all $USDu in the vault is currently borrowed and circulating in the market (due to strong trading demand), redemption may temporarily be delayed until borrowers repay.
* The protocol uses **adaptive interest rate models**:
  * The **borrow rate automatically increases** when utilization is high.
  * This incentivizes borrowers to repay their loans, returning $USDu liquidity to the vault.
  * Meanwhile, $sUSDu holders earn **higher APY** during this period of high utilization.

**Key Design Features:**

* The protocol does not and can not use user deposits to mint new $USDu, so user deposits are always safely isolated and can be redeemed.
* There is no fractional reserve mechanism or hidden risk of depegging.
* Borrowers can be liquidated if their positions exceed LTV thresholds, further protecting redemption liquidity.

**Summary:**

$USDu’s redemption is designed to always remain sound and transparent. The dynamic interest model ensures that market forces naturally balance supply and demand, creating a strong guarantee that users can redeem $sUSDu for $USDu, with higher yields during periods of tight liquidity.