Synthetic Creation / Closure Dynamics

On NEPRI TFA, any user can propose new markets. Once approved by holders of the native governance token, the market will open for collateral deposits and synthetic asset creation via Collateralized Debt Positions (CDPs).

Assets minted on NEPRI TFA with stablecoin collateral have a minimum collateralization ratio of 120%:

$$CR=SC/(TSAV ) ≥120$$

where CR = Collateralization Ratio, SC = Stablecoin Collateral, TSAV = Tokenized Synthetic Asset Value

Given the stability of the underlying collateral, the collateralization ratio is inversely proportional to the Tokenized Synthetic Asset Value. Considering a CDP with a CR of 120%:

• If the value of the tokenized synthetic rises, then the position becomes undercollateralized

• If the value of the tokenized synthetic falls, then the position becomes overcollateralized

In other words, minting on the NEPRI TFA protocol via stablecoins represents a short position on the tokenized synthetic, unless the tokenized synthetic itself is used as minting collateral (which represents a leveraged long position on the tokenized synthetic). Minting operations with stablecoin collateral may become the domain of short-sellers or sophisticated market makers, as well as yield farmers who accrue trading fees while hedging this net short exposure elsewhere.

Once minted, tokenized synthetic assets are freely transferable on the NEPRI Finance platform. Tokenized Synthetic assets can be burned at any time, redeeming the underlying collateral. Minting and burning is the equivalent of increasing or decreasing the total "open interest" on the tokenized synthetic.