Maintaining a 1:1 ratio of FTMz to FTM.
Having read this far you will now know the purpose of a Synthetic Asset derivative to allow a user to speculate on the price change of an asset without holding it. In this instance, FTMz is pegged 1:1 to the price of FTM.
However, the ratio will vary slightly over time as users mint & redeem their tokens. With sufficient volume on Zest Protocol the arbitrage activity based on minting & redeeming will ensure the peg remains as close to 1:1 as possible.
If the value of FTMz is less than the value of 1 FTM, then anyone can purchase it on the open market and redeem it for approximately the value of 1 FTM worth of value when there is a profitable arbitrage opportunity.
Purchase -> Redeem
If the value of FTMz is more than the value of 1 FTM, then anyone can mint it with the protocol for approximately the value of 1 FTM worth of value and sell it on the open market when there is a profitable arbitrage opportunity.
Mint -> Sell