The reserve ratio refers to the amount of cash reserves WOO X has in relation to its user deposit liabilities. A reserve ratio above 100% means that user deposit liabilities are backed 1:1 by assets on WOO X, as well as its cash reserves and insurance fund.
The custody ratio shows what percent of user deposit liabilities are stored with custodians or in cold storage, versus stored in third-party liquidity sources. Currently, some shares of users' deposits are utilized for hedging and liquidity aggregation on third-party platforms to provide the best price execution for traders on WOO X. To increase confidence from users, WOO X will strive to keep a safe custody ratio greater than 75%. This rate will also allow us to maintain our deep liquidity and lowest-fees value proposition for our users. In the future, users will be able to opt out of allocating their assets to market makers but may not receive all the benefits of lowest fee trading.
Why are some assets on third party exchanges?
WOO X does not operate like a typical exchange. WOO X utilizes a combination of market makers, third-party exchanges, DEXs, and other venues to provide deep liquidity with the lowest fees, while diversifying exchange risk to the user. Funds on exchanges are used solely for hedging and liquidity aggregation purposes, and are never used for speculation. The custody ratio reports the amount of user deposit liabilities safeguarded in custody and insulated from counterparty risk with third-party exchanges and market makers. Moreover, WOO X monitors third-party credit-worthiness 24/7/365 to minimize counterparty risk. Assets exposed on liquidity sources can be recalled to custody if counterparty risk is deemed too high.
What happens if a liquidity source becomes insolvent?
WOO X will always strive to protect users from losses. WOO X monitors third-party credit-worthiness 24/7/365 to minimize counterparty risk and the impact of a liquidity source becoming insolvent. This approach helps users diversify their exchange risk while accessing deep liquidity with the lowest fees. In the event that users require their assets to be claimed from WOO X, arising from liquidity issues, users are entitled to the benefits of senior creditors to the extent of applicable laws.
How can I be sure the numbers are accurate and authentic?
Data is updated every 15 minutes from a combination of on-chain data and API keys. WOO X aims to complete a financial audit by a reputable, independent third party to verify the data reported is accurate and complete.
What if the price of WOO drops?
First, WOO tokens are not included in the reserve ratio - only WOO X's cash reserves and non-WOO insurance fund are included. If WOO drops in value, these reserve ratios do not change because WOO balances are excluded. Moreover, WOO X does not use WOO tokens for collateral on loans and is committed to maintaining this policy indefinitely.
How do I know that the liabilities represent all users' liabilities?
WOO X uses Merkle Tree proofs to verify user liabilities (deposits and balances). Merkle Trees allow users to cryptographically verify that their balances are included in the complete snapshot of liabilities. Moreover, WOO X aims to complete a financial audit by a reputable, independent third party to verify the data reported is accurate and complete.
Why do I sometimes see a token mismatch between the assets and liabilities?
You may sometimes find that there's a token mismatch between the assets and liabilities. This is because some of the delta-neutral hedging activities utilize futures to hedge underlying spot positions while reducing exposure to liquidity sources. WOO X holds assets and positions against user liabilities. The strategy is strictly hedging with very tight risk limits.
