# Adapdive Inflation Management

To ensure that the number of 10x Tokens does not exceed 10% of the Pool Cap, Doubler Lite implements inflation management for 10x Tokens. 

Inflation management maintains the value of 10x tokens in the market circulation and controls the deflation of 10x tokens within the to-be-issued portion to the extent possible. This approach aims to avoid the impact of deflation on the circulated 10x tokens, thereby reducing the holding risk of 10x tokens.

### Inflation and Deflation Trigger Conditions

#### **Inflation**

When the pool's cap increases, the maximum supply of 10x tokens increases. The protocol triggers inflation to mint more 10x tokens.

#### **Deflation**

When the pool's cap decreases, the maximum supply of 10x tokens decreases. The protocol triggers deflation to burn 10x tokens.

> E.g.: The ETH Pool contains 10 ETH, and the current Pool Cap is $30,000 . The maximum issuance of 10x tokens for this pool is 3,000 tokens.
>
> If the price of ETH rises to $4,000 (Spot Price), the Pool Cap becomes $40,000. The maximum issuance of 10x tokens for this pool will increase. The protocol triggers inflation, and the inflation amount is (40,000 - 30,000) / 10 = 1,000 10x tokens.
>
> If the price of ETH falls to $2,000 (Spot Price), the Pool Cap becomes $20,000. The maximum issuance of 10x tokens for this pool will decrease. The protocol triggers deflation, and the deflation amount is (30,000 - 20,000) / 10 = 1,000 10x tokens.

### The Working Principle of Inflation Management 

#### **Inflation**

Doubler Lite's inflation management system automatically adjusts the supply of 10x tokens based on changes in the Pool Cap. 

When the market cap increases, the system triggers inflation to ensure that the number of issued 10x tokens reaches 10% of the Pool Cap. The newly minted 10x tokens from inflation are distributed in a 50:50 ratio: 50% to existing 10x token holders and 50% to increase the to-be-issued 10x tokens recorded by the protocol.

<figure><img src="https://content.gitbook.com/content/jn9OoOf0Uxf8Pt2iqZiD/blobs/H8SY8LW0DxTyhf61lt47/image.png" alt=""><figcaption></figcaption></figure>

> E.g: User A invests 1 ETH when the value of ETH is $3,000. She receives 3,000 ETH-C and 1 ETH-E. Since she is the only user in the pool, the Spot Price equals the pool's Avg Price, so User A does not receive any ETH-10x. The 300 ETH-10x tokens are in a pending mint status.
>
> **If User A chooses to burn 1 ETH-E and mint 300 ETH-10x:**
>
> When ETH rises to $4,000, User B invests 1 ETH. Due to the increase in Pool Cap, 100 ETH-10x tokens are minted through inflation, and 50 of these ETH-10x tokens are directly rebased to User A, who now has a total of 350 ETH-10x.&#x20;
>
> Since the Spot Price is greater than the Avg Price, User B does not directly receive any ETH-10x. The 400 ETH-10x tokens corresponding to the $4,000 value and an additional 50 ETH-10x tokens from inflation remain in a pending mint status. User B can choose to use 1 ETH-E to mint 450 ETH-10x.
>
> **If User A did not mint 300 ETH-10x with 1 ETH-E:**
>
> When ETH rises to $4,000, if User A chooses to mint at this point (triggering the contract), 100 ETH-10x tokens will be minted through inflation and sent to User A along with the 300 pending mint ETH-10x tokens. Thus, User A will burn 1 ETH-E to receive 400 ETH-10x.

#### **Deflation:**

When the pool's cap decreases, the protocol triggers deflation to stabilize the maximum issuance of 10x tokens at 10% of the Pool Cap.

During deflation, the protocol follows these steps,

* If there are to-be-issued 10x tokens in the current pool, the protocol first deflates the to-be-issued portion of 10x tokens.
* If the Pool Cap continues to decline and the to-be-issued 10x token amount reaches zero, the protocol proportionally deflates the circulating 10x tokens in the market until the current Pool Cap's 10% equals the number of issued 10x tokens.

<figure><img src="https://content.gitbook.com/content/jn9OoOf0Uxf8Pt2iqZiD/blobs/krWauD7SEBVXobzI51qO/image.png" alt=""><figcaption></figcaption></figure>

<figure><img src="https://content.gitbook.com/content/jn9OoOf0Uxf8Pt2iqZiD/blobs/pFkXxbCRhV9RF22HB2b2/image.png" alt=""><figcaption></figcaption></figure>

As shown in the above chart, the to-be-issued 10x tokens act like a buffer pool, absorbing the narrow fluctuations in the pool's token value most of the time. This mechanism ensures that the 10x tokens in circulation are not affected by deflation.&#x20;

In extreme market conditions, deflation of the circulating 10x tokens can also ensure that the total number of issued 10x tokens always equals 10% of the Pool Cap.