⛓️Core Mechanics

The Bariff ecosystem is built around several components that make memeFi happen in a safe, elegant, and dynamic way. At its core, the protocol features two mutually correlated tokens, CHINA and USA, each with the following characteristics:

1. Tuple Token Design: CHINA vs. USA

• CHINA: Communist-oriented, BERA-backed metastable memecoin, minted with BERA as collateral.

• USA: capitalism-oriented, BERA-backed metastable memecoin, minted with BERA as collateral.

• Both tokens exist in a K-equilibrium, where their combined value follows:

  • As CHINA demand increases, USA’s price adjusts to maintain balance.

  • As USA demand increases, CHINA’s price dynamically compensates.

2. Dynamic Minting & Perpetual Leverage

2.1 Minting as a Long/Short Mechanism

• Users deposit BERA to mint either CHINA or USA, effectively longing one asset while shorting the other one, without a fixed period of time.

• Burning CHINA allows minting USA (and vice versa), enabling strategic arbitrage.

• Minting fees dynamically adjust based on price disparities, ensuring metastability.

2.2 Price-Based Dynamic Minting Fee

The key for protocol sustainability is implementing dynamic collateral in response to excessive price divergence. In that sense, we can introduce a new concept called dynamic LTV mechanism, that adjusts based on the relative price difference between Token A (CHINA) and Token B (USA).

The standard Loan-to-Value is 80% when the price of A and B are close. As the price divergence increases, the LTV decreases, forcing borrowers to adjust their collateral. This prevents over-leverage in unstable conditions and reduces the systematic risk.

2.3 Defining Dynamic LTV Function

Let,

• $P_A$ and $P_B$ be the prices of tokens A and B.
• $\Delta P = \|P_A-P_B\|$ be the absolute price difference.
• $LTV_b=80\%$ be teh default LTV when $P_A=P_B$.
• $LTV_m$ be the minimum LTV allowed.
• $k$ be a sensitive factor controlling how fast LTV drops.
• $D_M$ the divergence threshold, which defines when the LTV reaches its minimum.

A simple way to adjust LTV is:

$$LTV = \max\left(LTV_m, LTV_b - k \cdot \left(\frac{\Delta P}{\min(P_A, P_B)}\right)\right)$$

Where:

• If $\Delta P$ is small, LTV remains at 80%.
• If $\Delta P$ exceeds a predefined threshold, LTV approaches 60%.
• k determines how aggresively LTV is reduced as price difference grows.