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Holder Conversion Right

Prices of the youves tracker tokens way lower than the target price undermine the trust of the youves tracker token and reduce the purchase power of holders. In order to protect them from low market prices of the youves tracker tokens, there is the possibility for holders to announce their intention to sell an amount of youves tracker tokens up to the held amount in their vault at the holder conversion price. There is an announcement period during which any minter can volunteer and buy the amount of youves tracker tokens from the holder exercising the conversion right at the holder conversion price.

If there is no volunteer, then the holder can sell the amount of youves tracker tokens to a minter selected by the platform at the conversion price.

Besides the protection from low prices, the holder conversion right also serves as a means to make the collateral backing of the youves tracker token tangible for a holder.

Opt-In#

Please note that the vaults for the uDEFI token will allow to opt-in on the holder conversion right. Those vaults that do not opt-in, will never be selected for a holder conversion and the collateral in the vault cannot be exchanged for outstanding tokens. However, these vaults will also not receive any YOU tokens. Any one vault can only do the opt-in decision once and it is non reversible.

Example#

  1. We start with the following assumptions:
    • the tez/USD exchange rate is at 3.0000.
    • The tez/uUSD exchange rate is at 3.3333.
    • This implies an uUSD/USD exchange rate of 0.9000.
    • Minter b's vault has tez 10,000 collateral locked.
    • Minter b's vault has uUSD 14,000 outstanding.
    • Minter b's vault has a collateral ratio of 214%.
    • Minter b's vault happens to be the lowest collateralised one on the platform.
  2. User a observes that the current implied price of uUSD/USD is lower than the holder conversion price.
  3. User wants to use the holder conversion right to sell uUSD 8,000 at the holder conversion price.
  4. The implied sell price is uUSD/USD 0.9375. Given the prevailing tez/USD price of 3.0000, this implies a buyback price of 3.2000. So user a states his intention to use the conversion right by clicking the "convert" button and locks 8,000 uUSD.
  5. User a then has to wait for 24 hours.
  6. During this 24 hour time period user a can withdraw the conversion intention at any time.
  7. During this 24 hour time period any other minter can step forward and match user a's intention to use the conversion right.
  8. If after 24 hours user a still wants to execute the conversion right (and if no-one previously matched the intention to convert), user a can sell the locked uUSD 8,000 at the price of 3.2000.
  9. Minter b's vault is chosen to be the counterparty for user a's conversion right as it is the one with the lowest collateral ratio.
  10. Minter b's vault locks and burn the uUSD 8,000 from the conversion right and at the same time releases tez 2,500 to user a.
  11. The vault now has tez 7,500 collateral locked and an outstanding amount of uUSD 6,000. The collateral ratio is now 375%.