Economics
Every PAR in circulation was borrowed against collateral worth at least $1.20, and every PAR can be swapped for $1 of that collateral. Money moves between three groups: borrowers, stability pool depositors and redeemers. The protocol itself keeps nothing; there is no treasury and no protocol fee.
Who pays whom
| Flow | Payer | Receiver | Amount |
|---|---|---|---|
| Interest | Borrowers | Stability pool | Trove debt x the trove's rate, accrued every second, minted as PAR to the pool |
| Upfront fee | Borrowers (open, borrow more, early rate change) | Stability pool | Seven days of interest at the trove's rate |
| Redemption fee | Redeemers | The redeemed trove | 0.5% floor plus the base rate, kept as collateral in the trove |
| Liquidation reward | The liquidated trove | The liquidator | 0.5% of the trove's collateral, at most two tokens |
| Liquidation collateral | The liquidated trove | Stability pool depositors | Up to 105% of the PAR the pool burned |
| Redistribution | The liquidated trove | Every other trove in the branch | Debt plus collateral worth up to 110% of it |
Interest
The rate you pick is a simple yearly rate accrued per second:
interest_per_second = debt x rate_bps / (10,000 x 31,536,000)10,000 PAR at 3.0% accrues 300 PAR in a year. The interest is minted to the stability pool, which is what pays people to hold PAR there.
Choosing a rate
Redemptions always take debt from the lowest-rate bucket first. So the rate is a trade:
| You pick | You pay | Redemption risk |
|---|---|---|
| Low rate (near 0.5%) | Little interest | First in line when PAR trades under $1 and someone redeems |
| High rate (near 25%) | A lot of interest | Last in line |
Being redeemed is not a loss of value at the oracle price: your debt drops by exactly the PAR burned, you lose collateral worth $1 per PAR at the redemption price, and you keep the fee. What changes is your exposure to SOL: part of your collateral has been swapped for the dollars you already hold.
Redemption fee
fee_rate = 0.5% + base_rate_after_this_redemption
base_rate_after = decayed_base_rate + amount / PAR_supply
decayed_base_rate = base_rate x 0.5^(minutes / 360)The base rate jumps with each redemption by the fraction of supply redeemed and decays with a six-hour half-life (BASE_RATE_DECAY_PER_MINUTE_WAD). Large or repeated redemptions get more expensive; quiet periods bring the fee back to 0.5%. redeem takes max_fee_bps so a transaction never pays more than the caller agreed to.
Stability pool returns
Depositors earn from two sources:
- Interest: every unit of borrower interest and every upfront fee is minted to the pool as PAR, split by deposit size.
- Liquidations: the pool burns PAR to repay an unsafe trove and receives its collateral, up to 105% of the PAR burned.
A deposit's PAR balance shrinks when liquidations use it, and its collateral balance grows by more than it lost at the liquidation price.
Debt ceiling schedule
| Days since launch | Ceiling per branch |
|---|---|
| 0 | 1,000,000 PAR |
| 30 | 2,000,000 PAR |
| 90 | 8,000,000 PAR |
| 180 | 64,000,000 PAR |
| 360 and after | 4,096,000,000 PAR |
The ceiling starts small on purpose: the program can never be patched, so it grows only as time passes without incident.