Reserve Fund (OLD)
Last updated
Last updated
The Reserve Fund is a public pool of ZUSD liquidity that is provided to be readily available to cover debts in the event of a Bank liquidation.
When liquidations occur, the collateral is moved in its entirety from the Bank contract to the Reserve Fund, and the necessary quantity of ZUSD is drawn out of the Reserve Fund to cover the liquidated Bank’s outstanding ZUSD debt balance. This ZUSD is then burnt and removed from circulation.
Because Banks are liquidated at a collateralization ratio of 110%, liquidity providers to the Reserve Fund receive the collateral at a discount to the current market price, offering a positive yield venue on ZUSD holdings. For every 100 ZUSD removed from the Reserve Fund during liquidations, LPs recieve $110 worth of collateral.
Liquidity Providers to the Reserve Fund will receive CTZ as additional compensation for securing the protocol. These tokens are emitted to the Reserve Fund LP token-holders, as opposed to being emitted directly to the Reserve Fund. This is to allow Reserve Fund LPs to accrue yield and participate in governance without needing to withdraw their ZUSD liquidity in order to claim rewards.