Frequently asked questions
IRMA protects against inflation by having a mint price that adjusts with inflation, while the redemption price remains independent. When inflation rises, the mint price increases proportionally, allowing IRMA's exchange rate with USD to rise. The redemption price is determined by the total reserve backing and the total IRMA in circulation, separate from the mint price. This mechanism ensures that IRMA can protect your savings from inflation.
Reserve backing means that when you mint IRMA, the stablecoin you use is stored in a vault and becomes part of IRMA's reserve. For example, if you mint 1,000 IRMAs at 1.0 USDC, you deposit 1,000 USDC with us. This 1,000 USDC is redeemable anytime in exchange for the 1,000 IRMAs. Until you redeem, the 1,000 USDC remains as reserve backing. If USD inflates, the value of your IRMA rises with respect to the USDC you deposited.
The redemption price of IRMA increases as the total reserve backing grows faster than the total IRMA in circulation. When inflation exceeds 2%, the mint price rises, leading to more stablecoin being deposited as reserve backing per IRMA. This additional stablecoin is stored as reserve backing, not counted as profit. Over time, this allows the redemption price to catch up with the mint price, although this process is slower. In extreme cases of hyperinflation, the redemption price may never fully catch up.