A careful balancing act
The Collateral Ratio (CR) dictates the ratio of ZSP required to mint or redeem one FTMz token. This mechanism ensures it do not become too advantageous to mint or redeem ZSP for FTM (or vice versa)
The collateral ratio cannot be manually set, but rather it is adjusted according to parameters set by the development team and ultimately by Zest DAO. The CR is updated every hour by a Gelato task. Anyone can update the collateral ratio once the 1 hour cooldown has finished.
The CR by the redeeming function and it is displayed as a percentage. This ratio expresses what percentage ZSP of is required to mint or redeem a FTM token.
CR will be adjusted every hour at the step of 0.2% (up or down)
For example: ➡️ TWAP over 1.005 FTM -> CR 🔽 ➡️ TWAP under 0.995 FTM -> CR ⬆️ At the beginning, the minimum CR is set at 100%. We will slowly reduce the minimum CR to 95% (but we cannot override the CR actually increasing or decreasing, this is dependent on the TWAP).
Note that the minting contract automatically buys ZSP from the market when CR < 100, you do not need to supply it to mint FTMz.
When CR < 100, you will receive (1 - CR)% of the amount you redeem in ZSP, to the same value as your collateral.