Rebalancing Mechanism

The rebalancing mechanism of Rise Token

The Fuse Leveraged Token is designed in such way that users get protection against liquidation, while market makers are well-incentivized to execute the rebalancing process.

Leveraging Up

When collateral (ex: gOHM) price is going up, the net-asset value of Rise Token (ex: gOHMRISE) will going up and the leverage ratio of the Rise Token will going down.

If leverage ratio is below specified minimum leverage ratio (ex: 1.7x), Rise Token need to borrow more asset from Rari Fuse (ex: USDC), in order to buy more collateral then supply the collateral to Rari Fuse.

Market makers can swap collateral to ETH if leverage ratio below minimal Leverage ratio.

The maximum amount of ETH available to swap is defined below:

usdcAmountMax = rebalancingStep * nav * totalSupply
ethAmountMax = convertToETH(usdcAmountMax)

Leveraging Down

When collateral (ex: gOHM) price is going down, the net-asset value of Rise Token (ex: gOHMRISE) will going down and the leverage ratio of the Rise Token will going up.

If leverage ratio is above specified maximum leverage ratio (ex: 2.3x), Rise Token need to sell collateral in order to repay debt to Rari Fuse.

Market makers can swap ETH to collateral if leverage ratio above maximum Leverage ratio.

The maximum amount of collateral available to swap is defined below:

usdcAmountMax = rebalancingStep * nav * totalSupply
collateralAmountMax = convertToCollateral(usdcAmountMax)

Rewards

In order to incentives the swap process, Rise Token will give specified discount price 0.6%.

• Leveraging Up: Market Makers can sell collateral 0.6% above the market price.

• Leveraging Down: Market Makers can buy collateral 0.6% below the market price

The market price is determined using Rari Fuse Oracle Adapter.