Maker Optionality

Makers must select both a fixed term and a risk tier, considering the current state of the protocol with respect to:

• Current Maker deposit-weighted-average risk rate: MWAR_t

Unlike the Taker side, the Maker deposit-weighted-average maturity (MWAM) is not kept in protocol state as it is not currently used by any protocol mechanisms (this is proposed for a future upgrade).

• Current Market Yield / Maker Capital

Maker Capital is defined as:

Thus individual Maker position shares, and yield, may be calculated based on the expectation of future value that is made available from the definition of Maker Capital. Thus, Maker yields can be supported, even in the presence of elevated expected Taker Claims (by, for example, including the value of the Asset Reserve in the definition of Expected Capital, representing recently accumulated ETH from premia that is collectively owned by Makers but is yet to be converted to USD).

Separately, although the Capital Reserve is not directly accessible to Makers, we include it in the definition of Market Yield to preserve the representation of an individual Maker’s position such that calculating the value of the position before the end of its fixed Term (or, more specifically, immediately after the position is opened) does not inappropriately show a negative yield.