The Mathematics Behind the Virtual Assets

Understanding the Mechanism of Holding Virtual Assets in the Treasury

The Market Reserves operate dynamically in response to market demand, autonomously determining the market price of BERO without necessitating any upfront capital. This approach ensures that the market price of BERO consistently remains equivalent to or exceeds the floor price, fostering abundant liquidity and encouraging the process of price discovery.

Beradrome employs a virtual bonding curve to manage the Market Reserves, thereby removing the necessity for upfront capital during the establishment of the floor price. This methodology engenders profound liquidity and minimal slippage for BERO from the outset, circumventing the need for external liquidity incentives. Participants can conveniently acquire and sell BERO at the prevailing market price from the market reserves at any given time. The virtual bonding curve defines a price range spanning from the Floor Price to infinity (∞), while remaining anchored to a finite supply of BERO tokens. The bonding curve initiates with the complete BERO token supply and a predetermined quantity of virtual BGT. This virtual BGT, akin to syntheticBGT, functions for accounting within the KY=K equation.

For instance, if both virtual BGT and BERO total supplies are set at 100 each, the equation would be (100 BGT) * (100 BERO) = K. Initially, all BERO resides within the bonding curve and none is in circulation. As a result, the virtual BGT remains untapped since there is no BERO available for sale into the pool.

For BERO to enter circulation, a user must initially purchase it from the bonding curve. However, at this point, there is real BGT available to be exchanged for the circulating BERO. For instance, (100 + 25 BGT) * (100 - 20 BERO) = 10,000. Now, there exists 25 actual BGT in the bonding curve and 20 BERO in circulation. If all circulating BERO were subsequently sold back to the bonding curve, the reserves would revert to the state of (100 BGT) * (100 BERO). This cycle reinstates the scenario where no BERO is in circulation and, consequently, no virtual BGT is required as liquidity.

This mechanism also serves as an introduction to elucidate how oBERO consistently remains in a favorable financial state. More on that in “oBERO is In the Money”