Backing Ratio - β

The Compass of RZR Monetary Policy

The backing (or bonding) ratio β measures how many non-native assets sit in the treasury for each RZR token in circulation:

$$\beta \;=\; \frac{\text{Protocol-Controlled Value (stable assets only)}}{\text{Circulating RZR}}$$

Numerator – USDC, tokenised T-Bills, the stable-coin leg of RZR/USDC LP, and any other risk-free assets that can be liquidated on-chain within minutes.

Denominator – All liquid RZR plus the staked supply (sRZR); tokens held by the treasury itself are counted, because they can be re-introduced to the market.

β therefore answers a single question: “If every token holder redeemed simultaneously, how many dollars could the protocol deploy per token?”

Why β Matters

1. Inflation Governance - RZR’s capped-inflation curve keys off β. When β < 1, issuance halts; between β = 1 and 2.5, APR rises from 0 % to 2 000 %. Thus β is the throttle that keeps rebase rewards solvent.

2. Floor-Price Enforcement - The hard-floor logic requires β ≥ 1. If market price dips below the floor, the treasury uses its stable reserves to buy back and burn RZR; those reserves exist precisely because β was >=1 before inflation resumed.

3. Collateral Listings - Lending protocols look to β to decide loan-to-value caps. A high, slowly increasing β signals lower default risk, unlocking deeper liquidity for RZR-backed loans.

How does β changes with a rising floor price?

When the hard-floor ratchets upward, each token suddenly “owes” more collateral: the required stable value per RZR steps from, say, $1.18 to $1.19. Because the treasury has just locked in the surplus that triggered the lift, the numerator (stable PCV) already covers the new obligation, but the denominator—circulating supply—hasn’t changed.

The immediate effect is that β, which is PCV / supply, slips slightly (the same pile of stables is now divided by a larger per-token requirement). That small dip is intentional: it nudges the APR curve down a notch, slowing emissions until fresh inflows replenish the surplus and nudge β back up.

In other words, every floor increase reallocates a slice of the surplus from “excess collateral” into “hard backing,” momentarily tightening issuance yet leaving the system fully solvent; subsequent bond deposits and Harberger taxes grow PCV again, pushing β higher and re-unlocking the steeper yield bands.

To underestand more about the floor price, read here.