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Collateral Pools
Backed by safe and secure pool of assets
Collateral pools in Synthex are specifically designed to mitigate market risk and promote the stability of synthetic assets. These pools consist of only native assets, as opposed to bridged assets, which ensures the reliability and ease of liquidation in the event of any unforeseen circumstances. This approach ensures that the protocol is backed by collateral assets with high liquidity.
To manage market risk, SyntheX also considers the volatility ratio for each collateral asset. For example, a volatile asset like ETH would have a lower volatility ratio (say 0.6) and a stable asset like USDC would have a higher volatility ratio (say 0.95). The account's borrowing power would depend on the volatility ratio. If you deposit $1000 worth of ETH, your borrowing power would be $1000*0.6 = $600. But if you deposit $1000 worth of USDC, your borrowing power would be $1000*0.95 = $950.
In addition, each collateral has a cap on how much of the collateral can be deposited to reduce high exposure to single assets. This ensures that the protocol's risk is spread out among a diverse pool of collateral assets, reducing the overall risk of the protocol.
Overall, the collateral pools in Synthex are designed to ensure the stability and security of the synthetic assets by managing market risk and ensuring that the protocol is backed by a diverse pool of collateral assets. The volatility ratio and cap on each collateral asset ensures that the risk is spread out and that the protocol remains stable and secure.
Last modified 2mo ago