๐งชCoverage illustration
Example to illustrate the mechanism :
The swapping fee to exchange ETH for cETH is set at 10%.
A user decides to swap ETH for cETH when the price of ETH is $1240 USD. This transaction is recorded by the smart contract.
Consequently, if the price of ETH drops below $1240 USD, the user will receive $AUSD when swapping back their cETH for ETH, in addition to their original tokens. This ensures that the user's assets remain at the equivalent of $1240 USD.
For instance, since $AUSD value is at $1 USD and ETH drops to $1200 USD, the user would receive $40 $AUSD, ensuring that their assets remain at the value of $1240 USD ($40 USD worth of $AUSD plus their original ETH).
The swapping fee is only deducted from the ETH to cETH swap, not from the reverse swap.
If the price of ETH exceeds $1240 USD, no $AUSD coverage is provided, as there is no loss.
This process is automated within our smart contracts. Any $AUSD received as coverage remains unrealized until the coverage period ends and the user chooses to swap back their cETH to ETH.
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