# Hedging System

Ethena's "Hedging System" is composed of a number of offchain application services that enable many critical aspects of the user experience, including:

* Calculating & publishing indicative prices for **minting** & **redeeming** *USDe*.
* Returning pricing to **mint** & **redeem** *USDe* requests.
* Ensuring the integrity of the system in real time.

The "Hedging System" ingests & interacts directly with the protocol's onchain smart contracts as well as the Ethereum blockchain.

{% hint style="info" %}
The "Hedging System" is extremely risk-aware and has been designed in a manner wherein the preservation of protocol collateral is the most important consideration. 
{% endhint %}

<figure><img src="/files/z7S4saTn10BYqdFWiWme" alt=""><figcaption></figcaption></figure>

### Responsibilities

At a level lower of detail, the "Hedging System" performs the following functions (but is not limited to):

* Ingests market data from CeFi Exchanges, "Off-Exchange Settlement" providers, Pyth and Redstone. This data includes order book updates, public trade information, as well as private portfolio, positions, orders, and trade information.
* Normalizes and validates the integrity of market data.
* Calculates the risk exposure of the portfolio relative to defined risk limits and goals.
* Reconciles internal system information relating to the protocol's portfolio, positions, orders, and trade information with CeFi Exchanges & "Off-Exchange Settlement" providers.
* Calculates & publishes indicative prices for **minting** & **redeeming** *USDe*.
* Ingests, validates, and publishes pricing for **mint** & **redeem** *USDe* requests.
* Determines where to route & execute orders upon a successful **mint** & **redeem** *USDe* request. This incorporates information about fees, depth of liquidity, existing positions, and other funding + basis opportunities.
* In real-time, validates all information & operations to ensure integrity relative to internal & external expectations.
* Monitors and alerts in regards to the availability of internal & external dependencies such as other internal services or CeFi Exchanges.
* Orchestrates the movement of backing assets between "Off-Exchange Settlement" providers and CeFi Exchanges.
* Publishes & alerts Ethena team members to real-time developments. Enabling immediate manual intervention in the event of inconsistency.
* Publishes & logs system data to different data stores. An example being the publication of trade data to a database.

***

### Hedging FAQ

[Notion FAQ Link](https://ethena.notion.site/Ethena-FAQs-3ccc1437e13343f8b74c0d005e4f5128)


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