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FAQ for Synthetic Asset Minting
Derivatives trading platform based on #BSC, allowing everyone to gain on-chain exposure to a vast range of assets.
1.What asset(s) can be used to mint synthetic assets?
Currently BUSD/KALA/kUSD can be used to mint synthetic assets.
2. What synthetic assets can be minted on Kalata now?
Currently, the protocol supports synthetic stock kCOIN and Kalata Protocol StableCoin kUSD.
3. What is the process for minting synthetic assets?
4. How is the price of synthetic assets on Kalata determined?
Synthetic asset minting applies Oracle to track the real-world asset price (i.e., Stock).
Synthetic assets minted by StableCoins will have short exposure, meaning that when the real-world asset price goes up, users will lose equity value under this scenario.
5. What is Minting Collateralization Ratio?
Collateralization Ratio is defined as: the value of collateral divided by the value of minted assets.
For example, use 10000 KALA as collateral to mint kUSD, and assuming that the current price of KALA-BUSD is 0.8U (BUSD per KALA).
Value of collateral is 10000*0.8 = 8000U. Since we have standard collateralization ratio of 200% (and a relatively safe ratio by default, which can be adjusted with the higher the safer), you can mint 4000 kUSD in this case.
6. What is StableCoin Minting?
StableCoin kUSD anchors its price by over-collateralizing KALA. When users use KALA to mint kUSD, the collateralized KALA will have short exposure, meaning that if KALA loses value, users’ equity will decrease.
7. What can you do with your minted synthetic assets?
You can add your minted synthetic assets to Liquidity Pools or trade them. Currently the live liquidity pool are kCOIN-BUSD, kCOIN-kUSD and kUSD-KALA etc. You can earn $KALA tokens for contributing liquidity for any synthetic asset. You also earn trading fees for providing liquidity.
8. How does one get liquidated after minting synthetic assets?
Redemption and Liquidation Auction will incur a protocol fee of 1.5% of the collateral value.
When Collateralization Ratio >= 150%, the minter can adjust or redeem the collateralized position, and protocol fee of 1.5% value of the collateral will be incurred when redeeming.
For example, collateralizing 10000 KALA, assuming that KALA is currently priced at 0.8U and a collateralization ratio of 200%, and hence 4000 kUSD is minted.
When the KALA collateral is being redeemed, in the above case, 4000 kUSD from the user will have to be burned, and 1.5% of 4000 kUSD, measured in KALA, will be charged;
4000 * 1.5 / 0.8 = 75 KALA
Therefore, redemption will burn 4000 kUSD and charge 75 KALA (No restriction on how long a collateralized position can be maintained).
When collateralization ratio drops to below 150%, other users can buy the original holder’s collateral at a discount. The holder should either add collateral or burn minted assets to adjust the collateralization ratio, to avoid risking the collateral through the liquidation auction process.
9. What happens when you remove your collateral used for minting synthetic asset?
The synthetic asset you minted is taken out of circulation once collateral is removed.
10. How frequently can one remove assets used as collateral for minting synthetic assets?
As often as one wishes to.
11. Will there be more synthetic assets that can be minted on Kalata?
Yes, in the future many other synthetic assets will be added.
12. Will other assets be used to mint synthetic assets in the future?
Yes, in the future other assets can be used as collateral to mint synthetic assets.