DA-06 · LESSON 01

Collateral ratios

KEY DEFINITIONS

Terms used in this lesson

Collateral: An asset pledged against a debt; it can be used to cover the debt if agreed conditions are breached.
BTC: The common market ticker for bitcoin.
Vault: A set of Bitcoin outputs and spending rules that holds collateral and represents the current loan state.
UNIT: Ducat’s dollar-pegged stablecoin, the asset a borrower can create against bitcoin collateral.
USD: United States dollar, the reference currency in a BTC/USD price.
Oracle: A system that reports outside information, such as a market price, for use by a protocol.

Debt, BTC collateral value, liquidation threshold, and minimum vault ratios determine available actions and risk distance.

35 min Difficulty 4/5 Not started

VISUAL MODEL

See the whole mechanism before going step by step

Use the diagrams to orient yourself. Then the guided explanation below teaches every part in depth.

4 explanatory views

CONCEPT-SPECIFIC MAP · ducat vaultA Ducat action moves one Bitcoin-anchored vault state to a successorSelect any state to inspect its exact role.

RELATIONSHIP MAPInputs, rule, and outputs

01
PREDECESSORCurrent vault outpoint
The current Bitcoin output anchors collateral and identifies the state being spent.
02
REQUESTCollateral ratios
The Collateral ratios workflow proposes one exact action and successor state.
03
POLICYProfile, oracle, signatures
Applicable policy, price evidence, authorization, and transaction shape are checked.
04
BITCOIN SPENDScript-valid transaction
Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules.
05
SUCCESSORNew outpoint and state
Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

Rule shown: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state.

STAGE 1 OF 5PREDECESSOR: Current vault outpoint

The current Bitcoin output anchors collateral and identifies the state being spent.

Governing relationship: Bitcoin checks the spend; Ducat components independently reconstruct and validate the additional protocol state. Complete path: 1. PREDECESSOR, Current vault outpoint. The current Bitcoin output anchors collateral and identifies the state being spent. 2. REQUEST, Collateral ratios. The Collateral ratios workflow proposes one exact action and successor state. 3. POLICY, Profile, oracle, signatures. Applicable policy, price evidence, authorization, and transaction shape are checked. 4. BITCOIN SPEND, Script-valid transaction. Bitcoin miners and nodes can include only a transaction that satisfies Bitcoin rules. 5. SUCCESSOR, New outpoint and state. Ducat validators reconstruct debt, collateral, token, and account changes from the confirmed transaction.

1. State transitionWhat exists, what changes, and what results

BEFORE

A vault holds 1 BTC and owes 40,000 UNIT. Compare BTC prices of $100,000, $60,000, and $50,000. Use a displayed teaching threshold of 1.25, not a claimed live threshold.

MECHANISM

Multiply confirmed BTC collateral by the accepted BTC/USD price, keeping units and timestamp visible.

AFTER

The ratio changes with collateral quantity, accepted BTC price, or debt. A configured threshold is a separate input, not part of the ratio formula.

Text equivalent: Starting from A vault holds 1 BTC and owes 40,000 UNIT. Compare BTC prices of $100,000, $60,000, and $50,000. Use a displayed teaching threshold of 1.25, not a claimed live threshold. The mechanism begins when Multiply confirmed BTC collateral by the accepted BTC/USD price, keeping units and timestamp visible. The resulting lesson is The ratio changes with collateral quantity, accepted BTC price, or debt. A configured threshold is a separate input, not part of the ratio formula.

2. Mechanism pathSelect a stage to inspect its job

STAGE 1 OF 4

Value collateral

Multiply confirmed BTC collateral by the accepted BTC/USD price, keeping units and timestamp visible.

Complete path: 1. Value collateral: Multiply confirmed BTC collateral by the accepted BTC/USD price, keeping units and timestamp visible. 2. Measure debt: Read the vault's UNIT-denominated debt from the current successor state rather than a wallet balance. 3. Divide value by debt: Compute ratio = BTC quantity times BTC price divided by UNIT debt, then express it as a multiple or percentage. 4. Compare configured boundaries: Use the active profile's action and liquidation thresholds to determine permitted actions and risk distance.

3. Rule and failure boundaryWhat accepts the result and where it can stop

ACCEPTED PATH

The worked case executes the named inputs and checks in the displayed order. Use the active profile's action and liquidation thresholds to determine permitted actions and risk distance.

CHANGED CONDITION

A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. It means collateral value is 1.5 times debt. The remaining price decline depends on the configured liquidation threshold.

Important distinction: A 150 percent collateral ratio means bitcoin can fall 150 percent before liquidation. It means collateral value is 1.5 times debt. The remaining price decline depends on the configured liquidation threshold.

Text equivalent: The accepted path is enforced by The worked case executes the named inputs and checks in the displayed order. Use the active profile's action and liquidation thresholds to determine permitted actions and risk distance. If the required condition changes, A missing, malformed, stale, unauthorized, or inconsistent required input stops at its first named boundary. It means collateral value is 1.5 times debt. The remaining price decline depends on the configured liquidation threshold.

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Learn the idea

A collateral ratio equals collateral market value divided by debt value. If a vault holds C bitcoin at price P and owes D dollar-valued UNIT, the ratio is C times P divided by D. A liquidation threshold and minimum operating ratio come from the active profile.

GUIDED EXPLANATION1/4 ideas inspected

Value collateral

Multiply confirmed BTC collateral by the accepted BTC/USD price, keeping units and timestamp visible.

The worked example follows the explanation

Inspect every idea above to open it.

Important distinction“A 150 percent collateral ratio means bitcoin can fall 150 percent before liquidation.”

It means collateral value is 1.5 times debt. The remaining price decline depends on the configured liquidation threshold.

FINISH LEARNING FIRST

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Inspect every guided idea, open the worked example, rebuild its mechanism, and complete the deterministic lesson tool. Your progress is saved automatically.