- Protocol Insolvency Fractional Redemption Strategy: When the protocol pooled collateral vault falls under 1:1 backing with RAI debt, the protocol freezes liquidations and new positions and allows fractional redemption strategy for RAI token holders. The guiding principle is that under extreme market conditions, the RAI token holders should not have to rush to the exit to redeem their collateral - instead, the collateral pool is split amongst all RAI token supply holders. All token holders will get their equivalent share of the collateral pool according to the supply of RAI that they hold. In this way, the fractional redemption strategy reduces volatity of the ecosystem and also stops prevents liquidations from flooding the market with XRD and crashing the supply of the XRD collateral.
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