200 USDC
($1/USDC
) at a collateral ratio of 1.00200 USDC
.200 FRAX
are minted in this scenario. Notice how the entire value of FRAX is in dollar value of the collateral when the ratio is at 100%
. Any amount of FXS attempting to be burned to mint FRAX is returned to the user because the second part of the equation cancels to 0
regardless of the value of 150 FRAX
are minted in this scenario. 120 FRAX
are backed by the value of USDC as collateral while the remaining 30 FRAX
are not backed by anything. Instead, FXS is burned and removed from circulation proportional to the value of minted algorithmic FRAX. 437.78 FRAX
are minted in this scenario. Proportionally, half of the newly minted FRAX are backed by the value of USDC as collateral while the remaining 50% of FRAX are not backed by anything. 62.54 FXS
is burned and removed from circulation, half the value of the newly minted FRAX. Notice that the price of the collateral affects how many FRAX can be minted – FRAX is pegged to 1 USD, not 1 unit of USDC. subtraction underflow
error.170 FRAX
returns $170
of value to the redeemer in 110.5 USDC
from the collateral pool and 15.867 of newly minted FXS
tokens at the current FXS market price.2
block delay parameter (adjustable by governance) on withdrawing redeemed collateral to protect against flash loans.