> For the complete documentation index, see [llms.txt](https://docs.universal.xyz/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.universal.xyz/docs/introduction-to-universal/universal-protocol-overview/redemption.md).

# Redemption

Token redemption involves reducing the supply of Universal tokens by redeeming them for the underlying assets. This process can only be initiated by merchant addresses.

<figure><img src="https://2533779672-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FXh5fv5YSvLZEWa12x8W9%2Fuploads%2FTiZcXdunnOR0OWKkbdMd%2FScreen%20Shot%202024-06-19%20at%209.53.40%20AM.png?alt=media&amp;token=2696fcb9-786b-43ba-b36b-d2109acd0894" alt=""><figcaption><p>Universal Token Redemption Flow</p></figcaption></figure>

To redeem Universal tokens, the **Merchant** must call the **`burn`** function in the smart contract, specifying the exact amount of tokens to be burned.

#### **Redemption Process:**

1. When the **`burn`** function is executed:
   * The specified token amount is **deducted** from the Merchant’s on-chain Universal token balance.
   * The **total supply** of Universal tokens is **reduced accordingly**.
2. Upon successful burning:
   * The Merchant **exchanges the burned Universal tokens** for an equivalent amount of the **underlying asset**.
   * The **total circulating supply of Universal tokens decreases**, ensuring a **fully collateralized and transparent redemption process**.