# Market Interpretation

Inspired by Uniswap, Timeswap uses a unique 3 variable constant product equation:
$X\times Y\times Z=K$
Where
$X$
= Principal Pool, Y = Interest rate Pool,
$Z$
= Collateral factor Pool
The market interpretation for variables
$X , Y, Z$
is as follows:
$X$
= Principal Pool, where lenders & liquidity providers deposit their assets
$Y$
= Interest Rate Pool such that ratio
$\frac{Y}{X}$
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
$\frac{Z}{X}$
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
$\frac{Y}{X}=\frac{0.15}{31556926}$
(annual interest rate expectation of 15% & number of seconds in a year = 31556926s) This means
$Y=\frac{0.15}{31556926}\times10000=0.0000475$
$\frac{Z}{X}=1.67$
(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
$Z=\frac{10000*1.67}{4000}$
= 4.175 ETH
So Alice can do pool initialization for the DAI-ETH pool with a duration of 6 months, such that variables
$X=10,000,Y=0.0000475,Z=4.175,K=1.98$