Risk Management Modules

From a system design perspective, if the value of ETHS accounts for a disproportionately high percentage in the entire system, it will lead to greater volatility in ETHC, which has relatively less value. As a result, it may not be able to anchor the target of reflecting only 10% of the overall eth value fluctuations. Therefore, the system requires certain risk management strategies and interventions in emergency situations.

We define the system's CR (Collateral Rate) as

$CR=\frac{N_{eth}*P_{eth}}{N_{eths}*P_{eths}} *100\%$

When the CR value is too low, it can prevent ETHS from anchoring and absorbing only 10% of the ETH value fluctuation. In such cases, the system needs to intervene to restore market balance.

The system has designed different risk management strategies based on the varying levels of risk in the market at that time.

CR< 130%

• Disable minting ETHS from ETH;

• Set redemption fee as zero for ETHS;

• Set mint fee as zero for ETHC;

• Increase redemption fee for ETHC;

CR< 120%

• Disable minting ETHS from ETH;

• Set redemption fee as zero for ETHS;

• Set mint fee as zero for ETHC;

• Increase higher redemption fee for ETHC;

• Utilize the insurance fund to buy ETHS in secondary market and then redeem to ETH.