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Vault Accounting

When calculating how many GenericUnit tokens to mint or burn during deposits and redemptions, the Controller uses a contextual-pricing mechanism that considers both the share token accounting price and the underlying asset (collateral) accounting price.

Accounting Price Definitions

Share Accounting Price

The share accounting price is the value assigned to each GenericUnit share token when converting between shares and assets during deposits and redemptions. This price determines how many shares are minted or burned for a given amount of collateral.

  • During deposits: Always valued at $1.00\$1.00
  • During redemptions: Valued at min($1.00,Total Collateral ValueTotal Units Supply)min(\$1.00, \frac{\text{Total Collateral Value}}{\text{Total Units Supply}})

The redemption formula ensures that if the protocol's collateral value has decreased below its backing requirement, shares are redeemed at their true backing value rather than at peg.

Asset (Collateral) Accounting Price

The asset accounting price is the value assigned to the underlying collateral (e.g., USDC, USDT) when converting between assets and shares during deposits and redemptions. This price is derived from oracle feeds and determines how much value the collateral contributes to the calculation.

  • During deposits: Valued at min($1.00,oracle price)min(\$1.00, \text{oracle price})
  • During redemptions: Valued at max($1.00,oracle price)max(\$1.00, \text{oracle price})

Conversion Formulas

The conversion between assets and shares uses the accounting prices defined above, which vary based on the operation context (deposit or redemption).

Asset to Share Conversion

When converting assets (collateral) into shares, the formula is:

Shares=Asset Amount × Asset Accounting PriceShare Accounting PriceShares = \frac{\text{Asset Amount } \times \text{ Asset Accounting Price}}{\text{Share Accounting Price}}

This formula answers: "Given X amount of assets, how many shares should be minted?"

The following table shows how many shares are minted when depositing 1000 units of an asset at different price scenarios:

Share \ Asset Price$0.995$1.000$1.005
$1.000995.001,000.001,000.00

Share to Asset Conversion

When converting shares into assets (collateral), the formula is:

Assets=Share Amount × Share Accounting PriceAsset Accounting PriceAssets = \frac{\text{Share Amount } \times \text{ Share Accounting Price}}{\text{Asset Accounting Price}}

This formula answers: "Given X amount of shares, how many assets should be returned?"

The following table shows how many asset units are returned when redeeming 1000 GenericUnit tokens at different price scenarios:

Share \ Asset Price$0.995$1.000$1.005
$1.0001,000.001,000.00995.02
$0.995995.00995.00990.05

Price Asymmetry Rationale

The protocol operates under the assumption that any deviation from peg of its collateral assets is temporary, and prices will eventually return to $1.00.

This conservative pricing approach protects the protocol from adverse selection during volatility. If the protocol accepted off-peg assets at market value in the opposite direction (above peg on deposits, below peg on redemptions), it would be vulnerable to exploitation and suffer permanent losses.