Swing Pricing

Swing pricing is a mechanism used by Node Owners to encourage users to maintain healthy liquidity within the Node. Owners set a target reserve ratio, representing the ideal proportion of liquid assets held in reserve. When the reserve falls below this target, withdrawals incur a progressively increasing penalty, discouraging excessive redemptions. Conversely, deposits that help restore the reserve toward the target receive progressively better pricing, rewarding users who improve liquidity. This approach stabilizes reserves and reduces the likelihood of speculative withdrawals during market volatility.

Swing Pricing: A pricing mechanism that adjusts the share price during deposits and redemptions to incentivize maintaining an optimal reserve balance. It reduces share value during heavy withdrawals (below reserve targets) and rewards deposits when reserves are below the set target.

Target Reserve Ratio: A specified percentage of assets that a Node aims to maintain in liquid reserves.

Max Swing Factor: The maximum percentage adjustment applied to deposits or withdrawals through swing pricing, set by the Node Owner to ensure fairness and protocol stability.