Reserve Fund
Creating a Safety Margin
The Syntetika Reserve Fund acts an insurance vehicle for potential drawdowns derived from the Hilbert Basis+ Strategy, underlying hBTC and shBTC's yield. It functions essentially as a drawdown prevention system, aiming to mitigate the strategies' market risks for three sigma events.
Funds Custody
The funds are held within Copper Custody, levering Copper's sharding system and each transaction requiring 3 out of 5 signatures Syntetika's Core Contributors. Syntetika will provide Real-Time-Proof-Of-Reserves for the Reserve Fund using Accountable's Technology.
Reserve Fund Capitalization
The Reserve Fund is capitalized by two major contributors:
Insurance Fund Fee: There is a dynamic fee on the gross returns of the Basis+ Strategy before profit distributions with shBTC holders, which is distributed to the Reserve Fund. The fee is calculated based on the insurance fund deficit, against the target fund reserves.
Private Token Sales: Syntetika is allocating a share of its' fundraising from token sales towards the insurance fund, in order to continue expanding.
hBTC Arbitrage Vehicle
The Insurance Reserves may also be used as the arbitrage capital between the current hBTC Market Price and its' effective collateral reserves. Should the hBTC Price fall substantially beyond backing price, the insurance fund will function as buyer of last resort to provide liquidity to the market and arbitrage the price at a profit which gets reverted back into the Reserve Fund.
More information will be published closer towards mainnet launch of Syntetika, including a detailed analytical report on the modelling for Insurance Reserves, covering the following topics:
Purpose & Capital Buffer Logic
Funding & Replenishment
Redemption Triggers & Use Cases
Three Sigma Events and Risk Mitigation
Strategy Risk Modelling
Last updated