# Redemptions and YUSD Price Stability

Yeti Finance utilizes Liquity’s unique economic incentives to create a robust and scalable stablecoin.
How does YUSD closely follow the price of USD?
The ability to redeem YUSD for collateral at face value (i.e. 1 YUSD for $1 of collateral) and to mint YUSD at a 103% against USDC create a price floor and price ceiling (respectively) through arbitrage opportunities. We call these "hard peg mechanisms" since they are based on direct processes. YUSD also benefits from less direct mechanisms for USD parity — called "soft peg mechanisms". As redemptions increase (implying YUSD is below$1), so too does the baseRate — making borrowing less attractive which keeps new YUSD from hitting the market and driving the price below $1. Another of these mechanisms is parity as a Schelling point. Since Yeti Finance treats 1 YUSD as being equal to 1 USD, parity between the two is an implied equilibrium state of the protocol. ### What are redemptions? A redemption is the process of exchanging YUSD for collateral at face value, as if 1 YUSD is exactly worth$1. That is, for x YUSD you get x Dollars worth of collateral in return.
Users can redeem their YUSD for collateral at any time without limitations. However, a redemption fee is charged.