Synthetic Parameters

The market parameters for synthetics and their associated collateral tokens are defined through Butane's governance. These parameters can be viewed on the asset's associated market details page. Each synthetic is parameterised as follows:

• Minimum Position: The minimum outstanding debt a CDP for this asset can ever have.

• Borrow Rate: The annualised interest rate for this asset. The most recent 71 rates are recorded for the synthetic — CDPs opened prior to the oldest of the 71 rates coming into effect are charged at the maximum of the 10 rates for that unaccounted time period (See Section 4.1 in the Yellowpaper).

• Savings Rate: The APY offered for the staking of the synthetic in the protocol. Rewards accrue in a linear manner, similarly to CDP interest.

• Maximum Liquidation Return: When liquidating a CDP, this determines the maximum return on the burnt value that you can claim from the owner as a liquidator. Any excess value is claimable by the position's owner.

• Liquidation Profit Treasury Share: Determines how much out of the profit from a liquidation (which is capped by the Maximum Liquidation Return) is sent to the Butane treasury as a fee.

• BTN fee discount: When paying for a portion of a position's interest in BTN, the % discounted from the debt amount. For example, if 1 MIDAS = 1000 BTN, there was 10 USDb owed as interest that could be paid in BTN, and the BTN fee discount for MIDAS was 30%, then that portion of the interest could be repaid via the burning of 7000 BTN.

• Redemption Share: When a redemption on a CDP occurs, the percentage of the burned synthetic value that is redeemed from the position. For example, for a parameter value of 98% and a position with a debt of 100 MIDAS, burning 10 MIDAS during a redemption would mean 9.8 MIDAS worth of collateral can be redeemed from the position.

Additionally, each collateral token for a synthetic is (distinctly) parameterised:

• Collateral Weight: The borrowing power for the collateral, and the inverse of the standard "Collateral Factor" risk parameter used in various borrowing services. For a given position with $x$ amount of this collateral with weight $w$, the value that can be borrowed against the collateral is given by $\frac{x}{w}$ and the total borrowing power of a basket of collateral assets (the "Borrowing Capacity") with values $x = (x_1, \ldots, x_n)$ and weights $w = (w_1, \ldots, w_n)$ is given by $\text{BC} \colonequals \sum_{i=1}^{n}\frac{x_i}{w_i}$. The position's proximity to liquidation (the "Health Factor") can hence be determined as $\text{HF} \colonequals \frac{\text{BC}}{s}$, where $s$ is the position's outstanding debt (this assumes the Maximum Proportion parameter is not upper bounding the borrowing power of collateral tokens, see below).

• Maximum Proportion: The maximum proportion of a given debt $s$ that can be collateralised by the token. e.g. a value of 50% means that for a debt of 100 USDb, at a maximum, only 50 USDb can be collateralised by this token. This means that for a basket of collateral, the sum of their Maximum Proportions must be over 100%, otherwise no debt can be created. This is to ensure that CDPs cannot be comprised singularly of perceived high-risk assets, and so risk is forcibly diversified. Hence, when this parameter is in play, the true health factor $\text{HF}$ of a position with collateral Maximum Proportions $m = (m_0, \ldots,m_n)$ can be determined as

$$\text{HF} \colonequals \sum_i \min\left(\frac{x_i}{w_i}, s \cdot m_i\right)$$