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Coverage Ratio Fee
This fee only applies to the side pool swaps. Deposits and withdrawals are not affected.
Experimental or newer stablecoins are riskier and may demand higher flexibility in maintaining their price peg at 1. Instead of continuously monitoring an asset’s health and pausing the asset pool during highly-fluctuating markets, e.g., soft de-peg, we note that the coverage ratio of de-pegging stablecoins is invariably high since traders will swap this stablecoin for other assets in the pool.
To prevent other assets in the protocol from being drained, we introduce an additional high coverage ratio fee or de-peg protection that will be applied on top of a regular haircut of a swap.
A stricter requirement will be placed on these volatile assets’ coverage ratios and supply limits for the best protection. When the coverage ratio of the from-token (of the volatile asset) exceeds
Start coverage ratio), a coverage ratio fee will be charged on top of the haircut to discourage users from swapping.
When the coverage ratio reaches the maximum limit (
End coverage ratio) we’ve set a 100% fee charged, meaning no further swap is possible.
The high coverage ratio fee is retained by Beluga and will not be included as part of the total assets for accounting purposes to maintain r ∗ = 1.
Note that the coverage ratio depends on the number of tokens in a single pool. The more tokens are in, the higher the start and end coverage ratio.