Redemption

Redemption is the act of burning a basket or vault token to withdraw the underlying assets that back it. It is the mirror image of minting: where minting locks assets and issues new shares, redemption destroys shares and releases the corresponding portion of the reserves. In an in-kind design, redeeming returns your pro-rata slice of every asset in the basket. In cash-style designs, the protocol sells the components and pays you out in a single asset instead.

Redemption is also what anchors a basket token's market price to the value of its backing. If the token trades below the value of the assets it can be redeemed for, arbitrageurs can buy it, redeem it, and sell the underlying for a profit, which pushes the price back toward net asset value. ERC-4626 standardizes redemption for yield vaults through its withdraw and redeem functions, and adopters such as Yearn, Beefy, and Morpho expose that same flow through a common interface. Tessera index tokens follow the same logic: shares are redeemable in-kind against an immutable vault, so the redemption rules cannot be changed after launch.

Before holding any redeemable token, check how redemption actually works. Gas costs scale with the number of assets returned, some products charge exit fees, and designs that swap on your behalf expose you to slippage. The most important question is whether redemption can be paused, delayed, or gated by an admin, because a token you cannot redeem is only backed in theory. Verify the redemption path in the contract, not the marketing.