Overcollateralization
A core pillar of USDQ's risk-managed minting framework
What is Overcollateralization?
USDQ adopts an overcollateralization model for all non-stablecoin deposits used to mint USDQ. This ensures that the value of locked collateral always exceeds the amount of USDQ issued, thereby safeguarding the protocol against volatility, slippage, and liquidity shocks.
The Overcollateralization Ratio (OCR) represents the ratio between the total value of a user’s deposited collateral and the USDQ minted from it.
How OCR is Determined
OCR values are dynamically adjusted per asset based on:
Market volatility
Liquidity depth
Slippage behavior
Historical price performance
This risk-adjusted OCR ensures that the protocol remains capital-efficient while resilient to sudden market downturns.
Example: Riskier assets like MEME tokens may require higher OCRs (e.g., 2.5x), while blue-chip assets like ETH may have lower OCRs (e.g., 1.5x).
OCR Formula
To calculate the OCR:
OCR = (USDQ Minted) / (Collateral Amount × Initial Mark Price)This ratio ensures that the minted USDQ is always over-backed by the value of the asset at the time of deposit.
OCR Buffer Explained
The OCR buffer refers to the portion of collateral held above 100% of the USDQ minted. It acts as a safety reserve, protecting the system from sharp price drops.
OCR Buffer = (OCR − 1) × Collateral AmountReclaiming the Buffer
At redemption, the reclaim method depends on market price:
If current price ≤ initial mark price
Full unit amount of buffer asset
If current price > initial mark price
USD value of buffer at initial price
⚠️ Note: Collateral asset values are based on live market conditions and subject to real-time fluctuations.
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