Mint Mechanism
Overview
Minting USDh involves creating new synthetic dollars, while redeeming USDh is the process of exchanging these synthetic dollars for Bitcoin.
How USDh is Created
USDh is minted directly through Hermetica. It is issued on Bitcoin Layer 1 using the Runes protocol.
Any registered business or individual in an approved jurisdiction who has completed Hermetica's KYC and AML processes can mint USDh.
The Approved Participants can also redeem USDh directly through Hermetica. Hermetica will unwind the derivatives position and return the collateral to the redeeming party.
Other users can purchase USDh through open DeFi markets without having to complete KYC/KYB or onboard through the Hermetica platform.
Infrastructure
All Bitcoin in the protocol is held at institutional-grade custodians Copper and Ceffu.
Their off-exchange settlement (OES) solutions allow us to mirror funds onto the centralized exchanges trading venues, while holding our assets in a bankruptcy remote Trust off of the exchange's balance sheet.
We trade on the 5 biggest centralized exchange which represent a total of over $20B in BTCUSD perp open interest. These exchanges are:
The short perpetual futures position delta-hedges the BTC in the protocol and locks in their dollar value, which is in turn represented on-chain as USDh.
While we currently use the exchanges listed above, we are always exploring new exchange partners to diversify our dependencies.
For more information about our use of institutional custodians and OES providers, please refer to our Security Mechanisms section.
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