Hybrid Collateral Model
Learn how Clone's innovative Hybrid Collateral Model allows for 1:1 swaps between bridged tokens and onAssets, facilitating efficient price pegging and providing profitable arbitrage opportunities.
Clone's Hybrid Collateral Model is a unique feature designed to maintain the stability of cloned assets within the ecosystem. This model permits a 1:1 swap between bridged tokens and their equivalent cloned assets (onAssets). For instance, it will be possible to mint 1 onBTC using 1 wrapped Bitcoin (wBTC). This 1:1 interchangeability is not just a matter of convenience; it serves a dual purpose in the Clone system.
Hybrid Collateral Model was invented for pegging.
The Hybrid Collateral Model does more than facilitate the swapping of assets; it plays a critical role in maintaining the price pegs of onAssets and fostering efficient market operations. By allowing users to freely interchange underlying tokens with onAssets, it opens up profitable arbitrage opportunities whenever onAssets deviate from their intended value. Imagine a scenario where onBTC's market price depegs from the real BTC price. Under the Hybrid Collateral Model, a user could buy the cheaper onBTC, swap it for wBTC at a 1:1 ratio, and then sell the wBTC for a profit. This arbitrage action helps to restore the price parity of onBTC, effectively strengthening our price pegging mechanism.
The Hybrid Collateral Model therefore contributes significantly to system robustness, efficiency, and responsiveness to market dynamics. It forms an integral part of our mechanism design, ensuring that our cloned assets remain closely pegged to their onchain counterparts, even in volatile market conditions. It's yet another example of how Clone our system design creates a more reliable and effective decentralized financial system.
Last modified 1mo ago