Collateralization Ratio

Quick Summary

• The Collateralization Ratio (C-Ratio) is a dynamic variable that changes based on the staked SYN value and active debt.

• Active debt is influenced by trader performance, net of fees. If traders are profitable, active debt increases, but if they aren't, active debt decreases. However, Synthetic Assets such as xSynth Perps have innovative risk management tools in place to ensure that they remain delta neutral.

• The Target C-Ratio, set by governance, determines staker rewards; stakers at or below the Target C-Ratio during the weekly staking snapshot (Wednesday) receive the maximum staking rewards.

• Target C-Ratio is critical for incentivizing participation by stakers and ensuring proper collateralization of the xSynth protocol.

Deeper Explanation of Collateralization Ratio

An account's collateralization ratio (or c-ratio for short) represents the ratio between its active debt and available XSYN being staked, expressed as a percentage.

Active debt refers to the dynamic proportion of the xSynth global debt pool that a staker is responsible for creating.

Practical Example:

• If you are responsible for 10% of the debt pool and the overall debt pool is 100,000, your current active debt is 10,000.

• If traders are profitable and the debt pool increases to 200,000, your active debt becomes 20,000.

• If traders are not profitable and the debt pool decreases to 50,000, your active debt becomes 5,000.

C-Ratio Calculation: C-Ratio % = (total XSYN value USD / active debt value USD) * 100

Since both XSYN value and active debt are constantly fluctuating, your c-ratio changes accordingly.

The Target c-ratio is a static, system-wide ratio applicable to all stakers equally. It determines the over-collateralization required for collateral in the system. This ratio is set through governance, and its current value can be found on the page.