SIP-36 Update redemption policy


Sperax protocol design doesn’t take into account the possibility of its underlying collaterals depegging significantly and as a result making the protocol undercollateralized in events where the underlying collateral tokens significantly depegged. To prevent this the USDs holders and the Sperax community should undertake the risks associated with the depegging of the underlying collateral. One unit of USDs should be made redeemable against any one unit of the other stablecoin which has been whitelisted to be accepted as collateral.


The event of USDC depegging was not factored into by the Sperax team and community in the current design of the Sperax protocol. USDs holders saw an opportunity to redeem USDs for USDC and receive multiple units of USDC per unit of USDs. This of course helped USDs maintain the peg for a longer period of time, but as a result the protocol became slightly undercollateralized.

Initially Sperax USD was set up as an algorithmic stablecoin which always allowed for 1:1 redemptions in USD value. When the protocol changed to a 100% collateralized model it retained this feature and the community and team didn’t anticipate a significant depegging of USDC. Although the community saw risks in other centralized stablecoins like USDT, stablecoin peg for Frax and USDC were never questioned.

The team also didn’t obstruct or pause redemptions since it believed in executing important protocol changes through governance. But redemptions automatically stopped once the balance of USDC in the Stargate strategy and vault became 0. The protocol was initially only designed to accommodate one redemption strategy per token. Although the community addresses changing the default investment strategy for USDC from Stargate to Saddle via SIP 27, the default redemption strategy was not changed. In future we will bring the ability for users to redeem from specific strategies. While the protocol’s redemption mechanism remained unpaused it lost some collateral, currently the collateralization stands at around 98.92%. The small losses that the protocol made in collateral ratio would be compensated with treasury funds and yield reserve. As per the protocol’s framework SPA tokens should be used to buy back USDs from the market and be burnt but the proposal is to use some of the pending Demeter fee collected, Sperax team’s funds and some of the auto-yield reserve to mitigate the small loss.

USDs cannot behave as a fully pegged stablecoin when the underlying stablecoins have depegged. In light of the current situation, it is important to make some changes to the redemption policy to prevent a recurrence of a similar event. Redemptions should remain unpaused till this new update is implemented. The USDs holders collectively should agree on which collaterals they wish to undertake the risk of price depegs. As of this time, all the current whitelisted collaterals USDC, Frax and Dai have regained their peg and are probably still more trustworthy than others. We leave it to the community to bring in proposals to update the collateral composition.

Given that USDs will be in future treated as being pegged to the underlying stablecoins instead of to the USD directly, one unit of USDs should become redeemable for one unit of USDC/ DAI/ Frax or any future whitelisted collateral.

Technical Specifications:

Update the vault core tools contract to allow one unit of USDs to be redeemable for a maximum of one unit of any underlying collateral (USDC, FRAX, DAI) based on the price of the collateral. If the price of a collateral is 0.98 then 1 unit of USDs can be redeemed for 1 unit of the collateral. If by some unforeseen event the price of a unit of collateral becomes more than 1 USD then 1 USDs will be redeemable for 1 USD value of that collateral.



Approve new redemption policy and allow Auto-Yield reserve and Demeter Fee collected so far to be used for covering the gap in collateralization.


Reject the changes to redemption policy and start redemptions

  • For
  • Against
  • Against with some changes

0 voters

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In support of this.

If a collateral depegs, there should be a mechanism to mitigate the damage before the DAO can resolve the issue.

This seems to be that mechanism.

I see no additional economic risks introduced by approving this SIP.

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Typo: Redemptions should remain paused.