This page explains what is recollateralization and how it effects the protocol.
If the protocol finds that one of its collateral pools does not have enough collateral to meet the collateralization ratio (CR), the protocol opens up the pool for re-collateralization.
Recollateralization allows users to deposit collateral into the pool and in turn receive a discount in ARTHX proportionate to how much collateral they've deposited.

Bonding curve discounts

The discount a user receives by re-collateralizing the protocol is based on a bonding curve which gives more rewards to people who participate in re-collateralizing the protocol early on.
If the protocol starts at a 10% collateralization ratio (CR) and has a target of 80% collateralization ratio, then the protocol calculates the distance from the target CR ratio, using this formula
x=CRtargetCRcurrentCRtargetx = \dfrac{CR_{target} - CR_{current}}{ CR_{target} }
Once the distance is calculated, it is applied to a bonding curve with the following parameters.
Discount=10x110DiscountmaxDiscount = \dfrac{10 ^ x - 1}{10} * Discount_{max}
This implies that early participants who re-collateralize the protocol will earn a higher discount in ARTHX than those who re-collateralize the protocol later.
Last modified 9mo ago
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