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Choosing Stable for safer tokens

If you own tokens that are used in Stable vaults (stablecoins, BTC, ETH etc.), you might want to earn yield from Stable vaults.
If Float vaults share some similarities with options, Stable vaults are a bit like bonds.
A bond is issued by governments and corporations to borrow money, and anyone who holds a bond is entitled to some constant yield from interest rates. The holder can also sell or redeem the bond to get the original capital back.
But the entities issuing the bonds can also go bankrupt, or get very close to it and scare the market off. In this case, the bond will start to lose value until potentially becoming worthless.
This is where bond ratings come into play, giving investors a way to separate the high quality bonds from “junk” that carries a lot of risk. Both types of bonds have their customers, as some TradFi degens will prefer the juicy yields from high risk bonds.
Translating this analogy to Zircon:
  • The country issuing the bond is the liquidity pool, and it goes bankrupt if the Float token becomes worthless.
  • The bond rating is the Health Factor shown in the UI (as well as the volatility of the Float token).
  • The market getting scared is simulated by a reduction factor called Omega.
Let’s go deeper into how it works now.