# Hybrid Collateral Model

## What is the Hybrid Collateral Model?

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 (clAssets). For instance, it will be possible to mint 1 clARB using 1 bridged ARB token. This 1:1 interchangeability is not just a matter of convenience; it serves a dual purpose in the Clone system.

<figure><img src="https://3949094638-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fw4WPxGBwVk5pi6YVemxj%2Fuploads%2Fyw4jY0D1MGqXE5VjXtXh%2FHybrid.png?alt=media&#x26;token=11d35931-0ca3-4c2d-a7f0-fa85145f560c" alt=""><figcaption><p>Hybrid Collateral Model was invented for pegging.</p></figcaption></figure>

## The Role of the Hybrid Collateral Model

The Hybrid Collateral Model does more than facilitate the swapping of assets; it plays a critical role in maintaining the price pegs of clAssets and fostering efficient market operations. By allowing users to freely interchange underlying tokens with clAssets, it opens up profitable arbitrage opportunities whenever clAssets deviate from their intended value. Imagine a scenario where clARB's market price depegs from the real ARB price. Under the Hybrid Collateral Model, a user could buy the cheaper clARB, swap it for bridged ARB at a 1:1 ratio, and then sell the bridged ARB for a profit. This arbitrage action helps to restore the price parity of clARB, 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.


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