nTokens are redeemable for a proportional share of all the assets in the nToken account. Upon redemption, users can elect to receive a single net cToken amount by converting their share of the nToken account's net fCash positions to cTokens via the on-chain liquidity pools. The entire redemption process occurs in the space of a single transaction.
In times of high utilization, nTokens can become temporarily unredeemable because the assets will be fully lent out to borrowers. In these situations, interest rates will become very high which will attract lenders to the protocol and make nTokens redeemable again.
Electing to convert fCash to cTokens in the course of redeeming nTokens results in a small amount of redemption cost. This cost depends on how much fCash is in the nToken account and the amount of nTokens that the user is trying to redeem. For most users this cost will be negligible. But for large nToken holders (>10% of the total nToken supply), redeeming their entire nToken holdings at once can be costly.
This figure illustrates how the redemption cost changes depending on the amount of nToken's a user is trying to redeem and the nToken's utilization rate. A utilization rate of 100% means that the nToken only holds fCash, and that there are no cTokens left in Notional's liquidity pools.
The nToken redemption cost will generally be minimal, only in extreme scenarios will most users see noticeable costs.