🔄Collateral Ratio
The collateral ratio is based on the amount of ETH held in the Pool contract, and the number of XETH tokens that have been minted against it.
When the protocol is in good health, ie: the 60-minute TWAP for ETH is higher than the price of ETH, the protocol will reduce the amount of ETH necessary to mint, and substitute it with an equal amount of ELZ tokens. It will reduce the required ETH amount by 0.01% each hour that the TWAP remains above 1.0.
If the TWAP dips below 100%, the protocol will automatically increase the amount of ETH backing by 0.02% each hour until 100% is reached, or until the TWAP is back above 1.0.
No changes are necessary by the user to adjust for the collateral ratio, as the protocol automatically calculates the optimal ratio of ETH / ELZ for inputs to mint XETH.
You can monitor the collateral ratio & TWAP on the homepage of the website.
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