The uWatt

The uWatt is an ERC-20 token backed by the Reserve. It targets a price of $1 and enforces the target at the source: the protocol's own desk, where every uWatt is created and redeemed at the value of its backing, up to $1. A target enforced at issuance needs no market interventions to defend it — as long as the backing is there, the price is too.

The cash desk

uWatt is created and destroyed at a single venue: the protocol's cash desk. A user deposits stablecoins and receives uWatt; a holder returns uWatt and receives stablecoins. Both operations quote the same price:

$$\text{price} = \min(\$1,\ C), \qquad C = \frac{\text{Reserve value}}{\text{uWatt supply}}$$

The desk reads the Reserve value from the on-chain attestation described in The Reserve, and refuses to trade at all if that attestation is stale: a protocol that has lost sight of its backing stops quoting.

While the Reserve covers the supply (C ≥ 1), the price is $1 in both directions:

• A mint at $1 adds a dollar of assets and a dollar of liabilities. The buyer gets what they paid for, a fully backed token, and none of the buffer above it. Whatever surplus the Reserve holds belongs to the system and, through the yield mechanism, to stakers; it cannot be bought at par.

• A redemption at $1 pays the holder in full, minus a redemption fee (0.5% at launch), and leaves the buffer untouched.

If backing falls below supply (C < 1), the same formula prices both sides at C:

• Redemptions pay the honest, impaired value. Everyone who exits during the impairment takes the same pro-rata haircut, so there is nothing to gain by racing to the exit: the classic run dynamic, where early redeemers are made whole at the expense of late ones, cannot start.

• Minting below par is the recapitalization window: fresh capital can enter at the depressed price, which adds backing and supply in the ratio that leaves C unchanged. The rescuer's return comes only if the Reserve recovers above their entry price. This window is bounded by a governance floor and ships closed at launch (the desk is par-only); opening it is a governance decision in its own right, discussed in Risk management.

Redemption liquidity

The desk pays redemptions from the Reserve's liquid sleeve: stablecoins plus tokenized short-duration instruments that unwind on demand. When the cash portion runs short, the desk automatically unwinds liquid instruments to cover the payout; if even that is insufficient, the redemption reverts rather than paying late or partially.

Redemptions are additionally metered by a daily limit (1% of supply per day at launch). The limit works as a queue rather than a cap: it spreads a redemption spike into an orderly sequence, giving the portfolio time to convert assets without forced sales. Combined with pro-rata pricing under impairment, it turns a stressed day into a line of people receiving the same price.

One detail closes an arbitrage seam: the redemption fee is kept strictly larger than the per-report movement band of the reserve attestation, so straddling a report (redeeming just before a value increase and re-minting just after, or the reverse) cannot turn a profit.

Heavy redemption also sets its own counterweight in motion. Exits are paid from the liquid side, the lowest-yielding part of the Reserve, so a wave of redemptions leaves the remaining backing more concentrated in energy assets and spreads the same energy revenue over a smaller supply, and the staking yield rises. A higher yield attracts new minting, and new minting arrives as stablecoins that rebuild the liquid side. The composition regulates itself: the flow that drains liquidity raises the return that brings liquidity back.

What the $1 covers

The promise has three parts:

• Every uWatt is redeemable at $1 while C ≥ 1, a condition the protocol maintains with its over-collateralization buffer.

• Redemption at any moment is guaranteed up to the liquid sleeve; the rest of the backing is productive infrastructure that takes time to convert. The daily queue exists to bridge exactly that timing gap.

• Below C = 1, the token is worth C and the desk says so. No mechanism pays anyone more than the assets are worth.

This is the profile of an over-collateralized, asset-backed instrument, functionally closer to a fixed-unit-value share in an income fund than to a payments stablecoin. Holders who want the fund's return stake their uWatt; the unstaked token is the stable unit, and the staked form is where the portfolio's earnings accrue. That split is the subject of Yield and staking.