⚖️Coverage Ratio

While other AMMs use the number of tokens to determine the exchange rate, Capybara inherits from Wombat of using an asset-liability management model to price assets.

Liquidity provided to the protocol would become a liability​. When users deposit and withdraw, liability changes, respectively.

The asset of token x is the amount of cash in the liquidity pool. Generally speaking, an asset of higher coverage indicates a lower default risk, and actions that increase the coverage ratio of a token are incentivized.

Last updated