Minting Reward and Withdrawal Fees

When minting rewards and withdrawal fees are high:

• Issuers are incentivized to mint ZeUSD

• Issuers are disincentivized to redeem ZeUSD

• This increases the ZeUSD supply

• The increased supply tends to put downward pressure on the ZeUSD price

When withdrawal fees, minting rewards are low:

• Users are incentivized to redeem/withdraw

• Users are disincentivized to mint ZeUSD

• This decreases the ZeUSD supply

• The decreased supply tends to put upward pressure on the ZeUSD price

At the current stage, protocol implements a simplified state machine for both minting rewards and redemption fees, characterized by the following parameters:

Minting Rewards States:

1. Fixed Stability Rate: A predetermined positive rate offered to incentivize minting

2. Zero Rate: No minting incentives provided

Redemption Fee States:

1. Positive Fee: A non-zero fee applied to redemptions

2. Zero Fee: No cost barrier for redemptions