Minting Mechanism

Henez protocol offers interest-free loans and is more capital efficient than other borrowing systems (i.e. less collateral is needed for the same loan). Instead of selling Ether to have liquid funds, you can use the protocol to lock up your Ether, borrow against the collateral to withdraw LUSD, and then repay your loan at a future date.

When zUSD is redeemed, the ETH provided to the redeemer is allocated from users with the lowest collateral ratio (even if it is above 110%). If at the time of redemption you have the Trove with the lowest ratio, you will give up some of your collateral, but your debt will be reduced accordingly.

At the beginning, only ETH and stETH will be used as collateral.

The USD value by which your ETH collateral is reduced corresponds to the nominal zUSD amount by which your Trove’s debt is decreased. You can think of redemptions as if somebody else is repaying your debt and retrieving an equivalent amount of your collateral. As a positive side effect, redemptions improve the overall collateral ratio, making them less risky.

Redemptions that do not reduce your debt to 0 are called partial redemptions, while redemptions that fully pay off a Trove’s debt are called full redemptions. In such a case, your Trove is closed, and you can claim your collateral surplus and the Liquidation Reserve at any time.