Buyback and Re-collateralization
As the Collateral Ratio changes, it will make the current ratio of USDC and DOPX used to back KUSD off. To maintain the ratio, we incentivize anyone to help make the ratio of USDC and DOPX correspond to Collateral Ratio.
When the Collateral Ratio increases, there will be a deficit of USDC in the system. In this case, the platform allows for re-collateralization by supplying the amount of USDC and getting the same value of DOPX worth the same as supplied USDC in return, plus 0.2% bonus to incentivize arbitrageurs to quickly provide the required collateral.
Given that:
P_DOPX is the price of DOPX
P_USDC is the price of USDC
B is the bonus return
There is a 0.6% re-collateralization fee.
Simplified process of re-collateralization
When the Collateral Ratio decreases, there will be a surplus of USDC in the system. In this case, the platform allows for buying back by supplying the amount of DOPX and getting the same value of USDC in return.
The received collateral can be calculated with this formula:
Given that:
P_DOPX is the price of DOPX
P_USDC is the price of USDC
Example:
In this example, there is a total of $100m collateral for all KUSD tokens in the market. As KUSD price increases, the Collateral Ratio decreases. From the change in Collateral Ratio, there is now $250,000 of USDC which is now overcollateralized and is open for buyback to happen. When buyback happens, surplus USDC is withdrawn to the person who does the buyback, and provided DOPX of the same value will be burned from the system.
There is a 0.6% buyback fee.