Collateralization Ratio

Quick Summary

  • Collateralization Ratio (C-Ratio) is a rolling, post-mint variable that constantly changes based on the stakers' SNX value and active debt.
  • Traders determine active debt, if traders are profitable, it increases, and if they aren’t profitable, it decreases.
  • Target C-Ratio is set by governance; if you are at or below the Target C-Ratio at the time of the staking snapshot (Wed 3-4PM UTC), you will receive max staking rewards.
  • C-Ratio plays an active role in incentive participation by stakers; it is vital in ensuring proper collateralization of the Synthetix protocol.

Deeper Explanation of Collaterization-Ratio

An account’s collateralization ratio, or c-ratio for short, is the ratio between its active debt and available SNX being staked in the form of a percentage.
Active debt is the dynamic proportion of the Synthetix global debt pool you, as a staker, are responsible for creating.
Here’s a practical example: - You are responsible for 10% of the debt pool; the overall debt pool is 100,000. Your current active debt is 10,000 - If traders are profitable and the debt pool is now worth 200,000, your active debt is $20,000 - If traders aren’t profitable and the debt pool is now worth 50,000, your active debt is $5,000
Here's how to calculate your c-ratio % = (total SNX value USD / active debt value USD) *100
Since SNX value and active debt are constantly moving, your c-ratio is also continually changing.
Target c-ratio is a static system-wide ratio that applies to all stakers equally. It determines the over-collateralization the system requires of collateral. It is a governance set variable, and the current value can be checked in the Current Protocol Parameters page.