Withdraw

Users can withdraw their desired assets from the Vault. MECA holders can withdraw the token they want by burning MECA, among the tokens listed in the vault. Withdrawals affect the overall process of other services within the ecosystem pulling the token from the vault as liquidity due to a shortage of specific assets within the vault. Therefore, in general, users may need to bear the risk of loss due to the penalty of disincentives. However, even in the withdrawal process, users can not only minimize losses but also discover opportunities to generate profits.

Expectations

Asset withdrawal from the Vault can serve three main purposes:

• Arbitrage trading through exchange rate fluctuations
• Hedging based on predictions of MECA

When a user attempts to withdraw money, the process proceeds according to the withdrawal formula. Depending on the amount of MECA burned through the exchange rate determined by the formula, the amount that can be withdrawn for a specific asset is determined by the value of MECA. However, when withdrawing specific assets from the Vault, the amount of tokens that can be withdrawn for the same MECA burn amount changes from time to time depending on exchange rate determining factors. To understand this better, we need to look at the currency conversion formula applied when withdrawing and understand its mechanism. The withdraw formula is as follows:

Formula

Factors

The withdrawal formula is influenced by five different factors. Each factor dynamically changes depending on the situation when withdrawing assets. Understanding the significance of each factor and considering when each factor operates favorably is crucial when withdrawing a token from the vault.

$q$ = The 'quantity' of the MECA to be burnt by the user.

$h$ = The 'holding' amount of the token in the vault.

$n$ = The 'need' amount of the token in the vault.

$w$ = The 'weight' value of token in the vault.

$g$ = $(h + n)$: The 'goal' amount that the token has to be held in the vault.

Calculation

Firstly, the amount available for withdrawal is calculated based on the ratio of the current holdings of the target token in the Vault to the weight representing the amount of MECA minted and circulated through that token. This determines how much value 1 MECA can be recognized as for the target token.

$$amount = \left(\frac{h}{w + q} \cdot q\right)$$

The current demand for MECA backed by the token to be withdrawn is calculated by summing up the quantity of MECA to be burned for withdrawal based on the allocated weight for the specific token. Then, the comparative value is determined by dividing the total holdings of the token in the vault. This process allows for the calculation of the withdrawal quantity by converting the amount of MECA burned into the value of the token.

$$TokenEarn = amount \cdot \frac{h - amount}{g = (h + n)}$$

The withdrawal formula calculates how the current withdrawal attempt affects the holdings of the Vault compared to the target amount the Vault should hold for that particular asset. For example, if the current holdings are 1000 and the withdrawable amount is 100, then the denominator would be 1000 - 100, resulting in 900. In a scenario where the Vault holds 1000 of a specific asset and the need value is 200, the 'g' value for that deposit round becomes 1000 + 200, totaling 1200.

Therefore, if the vault perceives a need for an additional 200 tokens of the particular token, the withdrawal attempt exacerbates the demand for that token within the vault. Consequently, by calculating the ratio of 900 to 1200, we assess how far the withdrawal attempt deviates from the target amount the vault should hold. In this calculation, since the withdrawal attempt moves further away from the target, a penalty in the form of disincentives is applied proportionally. As a result, the quantity of funds the user ultimately receives decreases.

The resulting withdrawal amount is the quantity of the specific token that the user obtains after burning MECA. Additionally, the amount of MECA burned affects subsequent withdrawal attempts as it proportionally decreases the weight value.

Dynamics

As withdrawals continue to be repeated, leading to a continuous increase in the Need value. If it eventually becomes positive or increases positive value, the quantity available for withdrawal for the corresponding token gradually approaches zero through the burning of MECA. This scenario reflects heightened selling pressure on the token due to increased withdrawal demands, resulting in a continuous increase in token scarcity. However, given that this process involves asset recovery via contract withdrawal or bond expungement rather than straightforward swapping, the weight value decreases concurrently with the burning of MECA during the withdrawal. Consequently, as withdrawals escalate, the scarcity of MECA also rises, thereby offsetting the decline in MECA value by maintaining an optimal conversion rate.

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To understand this mechanism, it may be helpful to conceptualize it as fundamentally different from a swap but rather akin to the nature of trading LP Token in the liquidity pool. As much as MECA is circulated in the market based on tokens deposited into the vault, and as much as MECA is burnt, assets are withdrawn from the vault. Although there may be some differences due to formulas and factors, they generally increase and decrease together, highlighting the distinction from swaps. In this process, If the Need value remains unchanged or increases with increasing demand, the amount available for withdrawal decreases. Consequently, as the quantity of MECA to be burned for the same amount of withdrawal increases is meaning of the withdrawal costs may rise, resulting in potential losses.

Chance

During the withdrawal process, if the demand for the token, represented by the need value, decreases sufficiently or the asset's assessed value in the external market exceeds MECA, and the value of the asset is higher even if you incur a loss due to exchange costs, losses can be mitigated or profits can be expected through arbitrage. Therefore, because the change in Need value is not always constant, the proportion changes via the service that uses the liquidity of the corresponding token in the vault, and incentives can be obtained according to the newly set Need value.

If the demand for the token decreases and selling pressure increases when the asset from the vault is used as liquidity in the market, the vault's token holdings may rapidly increase through the market. Alternatively, there may be attempts to directly sell the asset by depositing it into the vault, expecting that the value of the asset will plummet faster than MECA. In this process, the vault's holdings of the corresponding tokens increase, which may change the Need value from a positive number to a negative number.

For example, if the vault holds 1000 units of the corresponding asset and the Need value is -200, then 200 units of the corresponding token need to be removed from the vault. This situation indicates that the 200 units are unnecessary, making the value g for that withdrawal attempt 800 (1000 + (-200)). If the vault's holdings are 1000 units, and the withdrawal amount due to MECA burning is 100 units, then the numerator becomes 900 (1000 - 100). Thus, with a ratio of approximately 1.125 (900 / 800), the user can withdraw an additional 12.5% of the corresponding token quantity as an incentive in that withdrawal.

Fees

The withdrawal fee is 1%. Withdrawals can potentially have a detrimental impact on the overall liquidity of the ecosystem, as steady growth in the total value locked (TVL) within the vault is essential. Therefore, no separate bonus accrual exists for withdrawals.

Credit

When withdrawing tokens from the Vault, users will incur a loss of 2 credit score. Withdrawals are considered a negative action as they can lead to liquidity shortages in the entire ecosystem. Therefore, when initiating a withdrawal, an additional half of the 1% transaction fee will be deducted from credit points.