Funding Ratio Requirement

120% over-collateralisation, always.

What is the Funding Ratio Requirement?

The Funding Ratio Requirement secures 20% over-collateralisation within the DUS Reserve.

Why do we need this?

  1. To ensure sufficient collateralisation for the moments when USD (temporarily) outperforms DUCA.

  2. To provide an additional yield to those holding DUS at times when others are leaving in large numbers.

How does it work?

The total amount of available collateral backing is 120% of the total value of DUS in circulation at any given moment. The 120% should be calculated by taking two separate Reserves combined. The DUS Reserve and its corresponding Stake-Escrow DUS Reserve (seDUS).

The Funding Ratio of 120% needs to be realised through the value increase over time of the available backing in DUCA and its yield, but it is ensured by the Stability Pool as a guarantor.

STABILITY POOL SAFEGUARD

To ensure that DUS can never be under-collateralised and has a constant minimum Funding Ratio of 120%, the Stability Pool will provide a safeguard to ensure a 120% Funding Ratio under all circumstances. The DUS Reserve will have a corresponding Stake-Escrow DUS Reserve (“seDUS”). The Stability Pool will add DUCA to seDUS to always ensure the 120% Funding Ratio of DUS.

Whenever the Funding Ratio of the DUS Reserve increases above the target 120% the seDUS is reduced by sending the corresponding DUCA back to the Stability Pool. The DUCA in seDUS is locked and can only be unlocked / reduced through an increase in the Funding Ratio of the DUS Reserve. Whenever the DUS Reserve is emptied out, due to swaps, then the DUCA in seDUS will be used to fulfil any swap requests. For calculating the Funding Ratio of DUS the seDUS is included in the calculation. seDUS will generate DUCA Yield. For the lpRATE (and any other calculation concerning the DCM Liquidity) the seDUCA is not included in the calculation.

Adding and reducing DUCA will be done by directly minting and burning DUCA to provide an incentive to the Stability Pool.

ADDING DUCA

DCM Required from Liquidity (Stability Pool)=DUCA Required in seDUSDCM Market Value\large \mathrm{DCM\ Required\ from\ Liquidity\ (Stability\ Pool)} = \frac{\mathrm{DUCA\ Required\ in\ seDUS}}{\mathrm{DCM\ Market\ Value}}

  • DCM Required is used to mind DUCA and added to seDUS

REDUCING DUCA

Excess DUCA in seDUS=DUS Reserve×120%DUS Supply\large \mathrm{Excess\ DUCA\ in\ seDUS} = \mathrm{DUS\ Reserve} \times 120\% - \mathrm{DUS\ Supply}

DCM added to Liquidity (Stability Pool)=Excess DUCADCM Par Value\large \mathrm{DCM\ added\ to\ Liquidity\ (Stability\ Pool)} = \frac{\mathrm{Excess\ DUCA}}{\mathrm{DCM\ Par\ Value}}

FRONT RUNNER

The Front Runner is designed to make use of the changes in collateral value to reduce the safeguard provided by the Stability Pool.

Simply put, the Front Runner arranges the Reserve in such a way that all incoming fees and Exchange Value increases will be assigned to build the over-collateralisation, whilst the increase caused by DUCA Yield will be distributed as DUS Yield for 65% and 35% will be used to build the over-collateralisation ensuring the best of both worlds.

Whenever the target FRR is achieved and the DUS Supply starts to reduce, the Funding Ratio increases which results in an additional DUS Yield for those hodling DUS.

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