How to calculate profit or loss

Bellows are two examples to illustrate how we calculate profit or loss using SDP trading mode.

Example 4: Assuming two users A and B, A generates $100 rBTC, and B generates $100 rUSD, the respective debt ratio is 50%, and the total system debt is $200. Suppose the price of BTC rises by 50%, so the value of rBTC held by A becomes $150, and the value of rUSD held by B is still $100. At this time, the total system liability becomes $150+$100=$250. Note that because the debt ratio has not changed, A’s debt is $250*50%=$125, and B’s debt is also $125. Therefore, it can be calculated that the profit or loss of A is $150-$125=$25, and the profit or loss of B is $100- $125=-$25. The sum of all users' profit and loss in the entire system is 0, which is similar to a traditional contract trading system.

It should be noted that although B did nothing after generating rUSD, he/she still lost money due to the increase in the price of BTC. This is because rUSD is generated, which by default is equivalent to becoming a long position in the U.S. dollar (in this case, it is also equivalent to a short position in BTC)! We define this loss as "crafting loss".

Example 5: Suppose that following the assumption in example 4, now A holds $150 rBTC, and B holds $100 rUSD. Now suppose that there is a new user C, who generates rUSD of $100, and calculates the new debt ratio. Note that the total debt of A and B is now $250 instead of $200 in the initial state! Therefore, after C's operation, the total debt of the system becomes $350. The ratio of A is $125/$350=35.71%, the ratio of B is $125/$350=35.71%, and the ratio of C is $100/$350=28.57%.