Debt Pool

The debt pool is a pool of funds which back the minted synthetic assets

The debt pool is kept in multi currency – whereas synthetic assets are typically tracked in USD/GBP/EUR/JPY, and as per above examples will have currency risk relative to those currencies.

For example, assume the debt pool could look like this:

· Ethereum Deposits: 15 ETH = $15,000

· Tether Deposits (TUSD) = 20,000 TUSD = $20,000

Where stakers/makers makeup 70% of total pool. And buyers/takers make up 30% of the pool.

Buyers/Trader purchase synthetics to obtain exposure to the asset.

In Level 2 - Synthetics are backed by the debt pool

For example

1. Address 0x1D1479C185d32EB90533a08b36B3CFa5F84A0E6B requires $1000 worth of sySPY (S&P500 stock index) @ $100 per share

2. Assume 1 ETH = $1000

3. Collateral Ratio is 300%

4. Address 0x1D1479C185d32EB90533a08b36B3CFa5F84A0E6B deposits 3 ETH ($3000) into Synfy smart contract. Address is quoted price range. Address takes price range.

5. Fee pool takes a 0.3% fee, governance takes a 0.005% fee.

Scenarios including currency risk

· Assume 1 ETH = $800 (Ethereum has depreciated relative to USD)

· 10 shares of S&P500 at $100 = $1000 in value

· Original $1000 at 1 ETH is now $800 = 1 ETH

· Original $2000 collateral cover at 2 ETH is now $1600 = 2 ETH

· Addresses’s total collateral now is worth $2400, their collateral ratio is now 240% and not 300%. They are undercollateralized.

· The procotol will liquidate some of Addresses ETH collateral. This would be $3000 - $2400 = $600 or 0.75 ETH. Address will be able to withdraw 3 ETH – 0.75 = 2.25 ETH

Assume The price of S&P500 has now risen to $110 (10%)

· Assume 1 ETH = $800 (Ethereum has depreciated relative to USD)

· 10 shares of S&P500 at $110 = $1100 in value

· Original $1000 at 1 ETH is now $1100 = 1.25 ETH

· Original $2000 collateral cover at 2 ETH is now $1600 = 2 ETH

· Addresses’ total collateral now is worth $2700, their collateral ratio is now 270% and not 300%. They are undercollateralized.

· The protocol will liquidate some of Addresses ETH collateral. This would be $3000 - $2700 = $300 or 0.37 ETH. Address will be able to withdraw 3 ETH – 0.37 = 2.63 ETH