This page outlines the major computations that occur within the Athena protocol. These calculations are crucial for understanding the mechanics of cover pricing, liquidity provision, and reward distribution.
This page is still being expanded. Information might be incomplete.
Utilization Rate
The utilization rate (U) is a key metric that influences many aspects of the protocol. It represents the percentage of liquidity in a pool that is currently locked as a guarantee for bought covers.
U=Total liquidityTotal covered amount​×100%
Example:
Total liquidity in pool = $10,000
Total covered amount in pool = $3,500
U = (3,500 / 10,000) × 100% = 35%
Premium Rate
The premium rate (P_r) is calculated using a bi-linear curve based on the utilization rate. It determines the cost of covers and rewards for liquidity providers.
The reward rate (R_r) for liquidity providers is calculated by multiplying the utilization rate and the premium rate:
Rr​=U×Pr​
Example:
U = 50%
P_r = 8%
R_r = 50% × 8% = 4%
Cover Duration and Tick Spacing
The duration of a cover is measured in ticks, with the time between ticks (seconds per tick) varying based on pool utilization. The maximum seconds per tick is 86,400 (1 day), and the minimum is calculated as:
For the pool where the compensation occurs: New liquidity=Old liquidity×(1−Impact ratio)
For pools with shared liquidity: New shared liquidity=Old shared liquidity×(1−Impact ratio)
Example:
Pool A liquidity = $3,000 (including $1,000 shared with Pool B)
Pool B liquidity = $2,000 (including $1,000 shared with Pool A)
Compensation in Pool A = $1,000
Impact ratio = 1,000 / 3,000 = 33.33%
New Pool A liquidity = 3,000 × (1 - 0.3333) = $2,000
New Pool B liquidity = 2,000 - (1,000 × 0.3333) = $1,667
These computations form the backbone of Athena's risk assessment, pricing, and reward distribution mechanisms. Understanding them is crucial for analysts and users looking to deeply engage with the protocol.