# Collateral Ratio

The Collateral Ratio is the ratio in which the stablecoins and utility tokens are required to create the fractional-algorithmic stablecoin. For KUSD, it is the ratio between USDC and DOPX. A collateral ratio of 100% means that the user needs 100% worth of USDC and 0% worth of DOPX to mint KUSD, while a collateral ratio of 60% means that the user needs 60% worth of USDC and 40% of DOPX to create KUSD. Example of KUSD at Collateral Ratio of 60% (Backed by USDC 60% and DOPX 40%)
The general formula of calculating the proportion of KUSD is from this equation:
$KUSD=P_{USDC}\times USDC + P_{DOPX}\times DOPX$
$(1-C_r)( P_{USDC}\times USDC)= C_r(P_{DOPX}\times DOPX)$
At a Collateral Ratio of 60%, given that USDC price is $1 and DOPX price is$2, a user wants mint $100 worth of KUSD. The values can be substituted in the formula as follows: $100 = 1 \times USDC + 2 \times DOPX$ $0.4(1\times USDC) = 0.6(2\times DOPX)$ After solving the system of equations, the user will need to supply 60 USDC and 20 DOPX (this example excludes the minting fees for clarification). ### Adjusting the Collateral Ratio The Collateral Ratio might increase/decrease by 0.25% every hour by taking the price of KUSD as well as other factors (to be described below) into account. Eventually, the Collateral Ratio will reach the equilibrium at each moment in time that signifies the balance between the stablecoin and utility tokens, at which the Collateral Ratio will not change. The Collateral Ratio will gradually decrease if the price of KUSD has shown that it could be kept on peg for a certain period of time in order to utilize DOPX tokens more and be less dependent on the USDC value. On the other hand, the Collateral Ratio will increase when the price of KUSD is too volatile, especially when the price is below$1, in order to keep the KUSD price on peg. 