Eclipseum Pool ETH Ratio Explained

The Eclipseum Pool ETH Ratio (PER) is defined as the ratio of ETH held in the two AMM liquidity pools, and can be calculated as shown below.

This ratio indicates how much upside price potential Eclipseum has relative to downside price potential. A larger PER indicates more potential ECL / ETH price upside. A PER of one is neutral, as the contract attempts to balance the ETH in each pool by transferring ETH from the ECL pool to the DAI pool on every Buy ECL transaction.

Sections 4.2 and 4.7 of the Eclipseum Whitepaper outline how the PER works from a game theory perspective. There are three mechanisms that support the PER as an indicator, which are described below.

1) When the PER is greater than one, the ETH held in the DAI pool is greater than the ETH held in the ECL pool. This means the transaction fees transferred from the DAI pool to the ECL pool are relatively larger, and therefore the ECL / ETH price is more likely to increase.

2) When the Buy ECL function is invoked, the contract attempts to balance the ETH held in both pools by transferring ETH to the DAI pool if necessary. When the PER is greater than one, more of the ETH sent in a Buy ECL transaction will remain in the ECL pool, and therefore the ECL / ETH price is more likely to increase.

3) When the Soft Sell ECL / ETH price is greater than or equal to the ECL / ETH price, sellers are incentivized to utilize the Soft Sell ECL function over the Sell ECL function. Since the Soft Sell ECL function does not decrease the ECL / ETH price, the Soft Sell ECL / ETH price represents a theoretical price floor that the ECL / ETH price is unlikely to decrease below. Therefore, the larger the PER is, the less likely it becomes for the ECL / ETH price to decrease.

As can be seen in the chart above, the PER is currently at an all time high of around 2.5. While a high PER of course does not guarantee that the ECL / ETH price will increase, it does indicate that there is more potential for price upside than price downside at this given state. If you have any questions regarding the PER or Eclipseum in general, I encourage you to come join us on Telegram, or reach out to me directly at taylor@eclipseum.org.

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