Liquidity Target

POL/TVL Target Ratio vs POL/TVL Target Ratio

POL/TVL Target Ratio

POL/TVL target ratio is a parameter set by the governance which indicates the desired portion of the protocol-owned liquidity. The POL/TVL target ratio is applied to both USC/ETH and CHI/ETH LP tokens. The target ratio is implemented to incentivise a target level of protocol-owned liquidity and limit the oCHI issuance. The protocol can dynamically calibrate the amount of LP tokens in the DSO contract by specifying a target ratio. Furthermore, if the POL reaches the target ratio, no oCHI can be issued, limiting its release on the market.

POL/TVL Actual Ratio

Assuming that one liquidity pool's actual POL/TVL ratio is lower than the target ratio, users can obtain oCHI by providing USC/ETH and/or CHI/ETH LP tokens to the DSO contract. The POL/TVL actual ratio is computed for USC/ETH and CHI/ETH LP tokens through a formula that considers various factors, such as the protocol-owned LP tokens and the total LP tokens of the respective liquidity pool.

POL/TVL actual ratio (USC/ETH) = POL USC/ETH LP Tokens / Total USC/ETH LP Tokens

POL/TVL actual ratio (CHI/ETH) = POL CHI/ETH LP Tokens / Total CHI/ETH LP Tokens

*Note: Genesis POL/TVL target ratio is 80%. Governance can adjust it to calibrate the protocol-owned liquidity at a desired level.

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