# Minting

• Minters supply the initial liquidity for each market
• Minters earn a proportional share of trading fees for their liquidity contribution
• Minting is not required to trade on cypher
• Minters are inherently short the asset they mint

## What is minting?

Minters commit their USDC to supply assets in a certain market. Minted assets are sold via the orderbook to buyers. After depositing USDC into a minting account (recall: this is separate from USDC supplied to a trading account), users will choose the amount of the asset they would like to mint. The more assets a user mints, the greater share of protocol fees they will earn. However, their collateralization ratio (c-ratio) will decrease, increasing the risk of liquidation.
Because minters supply long positions, minters are inherently short the asset they have minted. They are creating assets that are sold to the market. Minters are required to ensure their initial minting c-ratio is 125%. After their initial minting position has been opened, to avoid liquidation, minters must ensure their maintenance minting c-ratio is ≥ 110%. In the event that their minting c-ratio falls below 110%, their position will be reduced until their minting c-ratio is above the liquidation minting c-ratio, which is 115%. Minters will only be able to withdraw USDC collateral in excess of a post-withdrawal minting c-ratio of 125% or they have burned all existing minted positions.
As the underlying price of the asset increases, a minter’s position will become less collateralized and to avoid liquidation, a minter would be required to deposit more USDC to maintain the 110% collateralization ratio. Conversely, as the underlying price of the asset decreases, a minter’s positions will become more collateralized, and they will have the opportunity to withdraw minted assets if they wish to maintain a collateralization ratio closer to 125%.
In exchange for the risk minters assume, they are rewarded with 70% of all protocol fees generated by the market in which they mint, paid proportionally to the minter's share of assets relative to the total amount of minted assets in such a market. This share of rewards may be adjusted in the future to reflect the relative need for additional supply to a market.

### Example Calculation

While a minter can deposit any amount of USDC into their minting account, they may only ‘mint’ as much of the asset such that their
minting c-ratio:
$cRatio_{minting}$
For example, say a minter deposits \$10k USDC as collateral. If they wish to mint BTC/ETH tokens at a price of 10, the maximum amount of contracts they could mint would be
$\#contracts=\frac{\textrm{USDC collateral}}{\textrm{125\% * asset priceUSDC}}$
which in this case equates to 800 contracts.
If the price of BTC/ETH were to increase 10%, their collateralization would decrease, now being
$cRatio_{minting}=\frac{\textrm{\10,000}}{\textrm{800 (contracts) * 11 (BTC/ETH price)}}=113\%$
This calculation is why minters are inherently short.