Collateral Ratio

Overview

The collateral ratio (CR) is the fraction of every XSD token that is backed by real WETH collateral versus the algorithmic BankX token. It is stored in PIDController.global_collateral_ratio as a uint256 with 1e6 precision.

At CR = 1000000 (100%), every XSD minted requires WETH equal to the full silver-gram value of the XSD amount. At CR = 850000 (85%), only 85% of the value needs to come from WETH; the remaining 15% is covered by burning BankX tokens. At CR = 0, XSD is purely algorithmic and backed entirely by BankX.

The protocol launches at CR = 1000000 (fully collateralised) and adjusts dynamically over time.

Key Concepts

• global_collateral_ratio — Stored in PIDController; read by CollateralPool for all mint/redeem calculations.
• xsd_step — The increment by which CR changes per systemCalculations() call. Default: 2500 (0.25% in 1e6 precision).
• collateral_ratio_cooldown — Minimum elapsed time between CR updates (seconds). Set at initialisation by the owner.
• growth_ratio — Ratio of BankX market cap (in the AMM pool) to uncollateralised XSD supply. Used optionally to inform CR direction.
• GR_top_band / GR_bottom_band — Tolerance bands around growth_ratio for the growth-ratio-based CR adjustment mode. Default: 1000 each.
• FIP_6 — Optional mode that restricts systemCalculations() calls to when XSD is outside its price band.

CR Adjustment Logic

systemCalculations() in PIDController is callable by anyone (subject to collateral_ratio_paused == false). Each call:

1. Reads current XSD and BankX spot prices from the AMM pools (10-slot rolling average).
2. Computes the silver band:

   uint256 silver_price = (XSD.xag_usd_price() * 1e4) / 311035;
   uint256 XSD_top_band  = silver_price + (xsd_percent * silver_price) / 100;
   uint256 XSD_bottom_band = silver_price - (xsd_percent * silver_price) / 100;

3. Decides the CR direction:
   • xsdprice > XSD_top_band → decrease CR (XSD is above peg, less collateral needed).
   • xsdprice < XSD_bottom_band → increase CR (XSD is below peg, more collateral needed).
   • If within band and use_growth_ratio is enabled: adjust CR based on BankX market cap growth.
4. Enforces the cooldown (collateral_ratio_cooldown), then applies the delta and emits PIDCollateralRatioRefreshed.
5. Updates the interest rate:

   uint256 _interest_rate = (1000000 - global_collateral_ratio) / 2;
   interest_rate = _interest_rate > 52800 ? _interest_rate : 52800;

   Interest rate has a floor of 52800 (~5.28% annual).

Mint Modes by CR

Similarly for redemptions:

CR Precision Example

// CR = 85% encoded as:
uint256 global_collateral_ratio = 850000; // 850000 / 1e6 = 0.85
 
// WETH needed to mint 1 XSD (in USD terms):
uint256 weth_dollar_needed = silver_price * global_collateral_ratio; // 85% of silver gram price
 
// BankX needed to mint 1 XSD (in USD terms):
uint256 bankx_dollar_needed = silver_price * 1e6 - weth_dollar_needed; // 15% of silver gram price

Interest Rate and CR

The interest rate paid to minters is derived directly from the CR:

interest_rate = max((1,000,000 - global_collateral_ratio) / 2, 52,800)

At 100% CR: interest_rate = max(0, 52800) = 52800 (~5.28% annual). At 85% CR: interest_rate = max(75000, 52800) = 75000 (~7.5% annual). At 0% CR: interest_rate = max(500000, 52800) = 500000 (~50% annual).

The higher the algorithmic fraction, the more minters are compensated for the additional protocol risk they absorb.