Calculate the Reserve Ratio
For readers who are interested in how to actually calculate the reserve ratio, this subsection provides a concise introduction with a simple hypothetical example. The formula for the reserve ratio is given by
How to calculate total liability in USD1
Total USD91 supply = Q_91 = 1000
Total USD971 supply = Q_971 = 1000
Total USD1 supply = Q_1 = 1000
USD91/USD1 rate = x = 0.012 (1 worth of INR in USD value)
USD971/USD1 = y = 0.27 (1 worth of AED in USD value)
Total liability = Q_91*x+Q_971*y+Q_1 = (1000*0.012 + 1000*0.27 + 1000) = 1282
So, when all the Unitas stablecoins are burned based on the current Unitas rates, there are 1282 USDTs redeemable on demand. This 1282 is interpreted as how much the protocol owes the users (i.e., Unitas stablecoins holders).
How to calculate total reserves in USDT
USDT in reserve = 1000
USDT in insurance pool = 500
= USDT in reserve + USDT in insurance pool = 1000+500 = 1500
Total Reserves = USDT in reserve + USDT in insurance pool = 1000 + 500 = 1500
Hence we are ready to conclude:
Reserve-Ratio
= total reserves/total liability
= (USDT in reserves + USDT in insurance pool)/(Q_91*x+Q_971*y+Q_1)
= 1500/(1282) = 1.17,
meaning that the reserve ratio of Unitas in this example is 117%.
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