⚙️Dynamic Collateralization Ratio

At the heart of Solidus Synth is a dynamic collateralization model engineered to ensure the stability, efficiency, and scalability of all synthetic assets within the ecosystem.

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📊 Collateral Ratio (CR)

The Collateral Ratio (CR) determines the current mix of collateral backing each synth token, comprising both the utility token (e.g., AVA) and the underlying Layer 1 (L1) asset. Expressed as a percentage, this ratio is central to the minting and redemption mechanisms.

• CR is dynamically adjusted hourly, either upward or downward, based on the asset’s price trend, current demand and forecasts.

• Adjustment Logic (based on 60-minute TWAP):

  • ▶️ If TWAP > 1.005 Avax → CR decreases

  • ▶️ If TWAP < 0.995 Avax → CR increases

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🚀 Capital Efficiency from Day One

Solidus Synth launches with an initial and minimum collateralization ratio of 90%, in contrast to most synthetic protocols that demand over 100% collateral. This design offers enhanced capital efficiency without compromising the security and stability of synthetic assets.

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🔐 Collateral Composition

Each synthetic asset is backed by a combination of:

• ✔️ 90–100% of the asset it represents (e.g., sxAvax is backed by at least 90% AVAX)

• ✔️ 0–10% of the native Solidus Synth utility token in POL LP for the respective chain (e.g., Ava/Avax LP on Avalanche)

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🔄 Toward Capital-Efficient Scaling

Smart Liquidity Optimization: As the protocol matures and liquidity deepens, the CR will gradually decrease based on defined risk parameters—unlocking further capital efficiency and scalability.

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