= Principal Pool, where lenders & liquidity providers deposit their assets
Y
= Interest Rate Pool such that ratio
XY
is equal to the maximum interest rate per second of a pool for a particular token pair at the time of the transaction for the remaining duration of the pool
Z
= Collateral factor Pool such that ratio
XZ
is equal to the minimum CDP of a pool for a particular token pair at the time of the transaction for the remaining duration of the pool
Let's deep dive into how to use market interpretation with an example:
Alice wants to initialize a DAI-ETH pool with a maturity time of 6 months. She wants to lock 10,000 DAI and expects an annual return of 15% and a CDP of 167% for the given pair and duration.
X=10000
DAI
XY=315569260.15
(annual interest rate expectation of 15% & number of seconds in a year = 31556926s)
This means
Y=315569260.15×10000=0.0000475
XZ=1.67
(CDP of 167%), such that the value of
Z
is ETH equivalent in DAI
Assuming the price of ETH at the time of pool creation by Alice was 4000DAI, this means the value of
Z=400010000∗1.67
= 4.175 ETH
So Alice can do pool initialization for the DAI-ETH pool with a duration of 6 months, such that variables