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Bailout / Minter Conversion Right

Bailout / Minter Conversion Right#

Prices of the youves tracker tokens which are much higher than the target price are a problem for minters. In effect minters are short the youves tracker tokens and are vulnerable to short squeezes. Also if they want to close out their vaults during high prices for any reason they take a financial hit. To protect minters from excessively high prices of the youves tracker tokens, there is the possibility for minters to buy back an amount of youves tracker tokens out of the savings pool / minter conversion pool. They can buy back up to the outstanding youves tracker tokens in their vault at the minter conversion price. The advantage of this setup with the savings pool / minter conversion pool is that it allows for a conversion right, while at the same time ensuring that youves tracker tokens which are used for other purposes are not subject to a sudden potential conversion by a minter.

Savings Pool / Minter Conversion Pool#

Holders of the youves tracker tokens have the possibility to put their youves tracker tokens into the savings pool / minter conversion pool, this allows them to benefit from the asset interest rates.

Only these tokens posted in the savings pool / minter conversion pool will be available for exercise of the bailout / minter conversion right.

Example#

  1. We start with the following assumptions:
    • There are uUSD 100,000 in the savings pool.
    • the tez/USD exchange rate is at 3.0000.
    • The tez/uUSD exchange rate is at 2.3000.
    • This implies an uUSD/USD exchange rate of 1.3043.
    • Minter a's vault has tez 10,000 collateral locked.
    • Minter a's vault has uUSD 10,000 outstanding.
  2. Minter a wants to close its vault and observes that the current implied price of uUSD/USD is higher than the bailout price / minter conversion price.
  3. Minter a uses the bailout / minter conversion right to buy back and burn uUSD 10,000 to fully close out its vault.
  4. The implied buy back price is uUSD/USD 1.2500. Given the prevailing tez/USD price of 3.0000, this implies a buyback price of 2.4000. So minter a pays tez 4,166.67 (= uUSD 10,000 divided by tez/USD 2.4) out of its vault.
  5. There are tez 5,833.33 in Minter a's vault left and 0 outstanding uUSD.
  6. Both the deduction of uUSD 10,000 and the addition of tez 4,166.67 are done proportionally to the size the contribution of all savers to the savings pool at that moment.
  7. The savings pool has uUSD 90,000 left and now there are additionally tez 4,166.67 ready to claim from existing savers.
  8. The additional tez will be visible to saver once they either add or deduct uUSD from the pool.