> For the complete documentation index, see [llms.txt](https://docs.keikofinance.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.keikofinance.com/redemption-mechanism/redemptions-model.md). # Redemptions Model The Keiko Protocol's Vault redemption model ensures that KEI stablecoin maintains its peg by allowing 1:1 redemption of KEI for the collateral held in Vaults, albeit with an associated fee. This feature is crucial for maintaining the price stability of KEI and providing a fail-safe mechanism for holders. ### Redemption Mechanism **1:1 Redemption**: Anyone can redeem KEI 1:1 for the collateral in any Vault, subject to a transaction fee. This mechanism is designed to ensure that KEI never falls below its target price. #### Calculation of Redemption Priority * **Nominal Collateral Ratio (NCR)**: This is calculated as the Collateral value divided by the Debt value for each vault. $$ NCR = Collateral / Debt $$ * **Minimum Collateral Ratio (MCR)**: Each vault has an MCR defined, which is critical for determining its financial health. * **MCR Factor**: A parameter used to tweak the weight of the MCR Component. * **MCR Component**: This is derived by multiplying the vault’s MCR by the mcrFactor. $$ MCR Component = mcrFactor \* MCR $$ #### Adjusted Redemption Score (ARS) $$ ARS = NCR + mcrComponent $$ * The ARS for each vault is calculated by adding the Nominal Collateral Ratio (NCR) to the MCR Component. * The ARS determines the order in which vaults are redeemed; the vault with the lowest ARS is given priority in redemption. * Vault owners can increse their ARS by increasing their NCR and their MCR --- # 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.keikofinance.com/redemption-mechanism/redemptions-model.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.