31:T470,md` This two-token system enables us to have multiple ways to absorb price pressure, while still aiming for a particular FLOAT target price. FLOAT is not pegged to a particular value in USD but its target price is re-adjusted gradually over time based on the market demand for FLOAT and the value of the assets held in the basket. This characteristic gives the Protocol great flexibility in various market conditions. ## Expansion In times of high demand for FLOAT, the Protocol will offer to sell FLOAT tokens in exchange for ETH and BANK tokens via a "Dutch Auction" (explored in depth later in this litepaper). The specific blend of ETH and BANK will depend on the value of the Basket relative to the value of all FLOAT in circulation. The ETH is added to the Basket and the BANK is burned (which provides positive price pressure for BANK and benefits holders). Hence part of the price pressure on FLOAT is transferred to BANK in addition to the Protocol's Basket. For every expansion, the Protocol will take a small fee in terms of BANK to go into a community governed treasury to pay for future development and associated costs. `32:[] 2f:{"title":"Two Token System / Float Protocol ","cells":[{"id":0,"value":"md`\n

Two Token System / Float Protocol

Float Protocol › Two Token System

\n\n# Two Token System\n\nThere are two tokens in the Float Protocol system: FLOAT and BANK. FLOAT is the token that is designed to act as a floating stable currency. BANK is the second token of the system. It serves three purposes:\n\n1. To take the profit created in times of excess demand for FLOAT.\n2. To occasionally support the price of FLOAT in times of too little demand. \n3. Govern the FLOAT Protocol.\n\nBANK’s price is affected by stabilisations in the FLOAT price. In the simplest case, if the market price of FLOAT is high relative to the FLOAT target price, this excess demand is captured and transferred to BANK. Similarly, if the market price of FLOAT is low relative to the target price, BANK is sometimes used to support the FLOAT price.\n`","pinned":false,"hidden":false,"mode":"ojs"},{"id":24,"value":"$31","pinned":false,"hidden":false,"mode":"ojs"},{"id":29,"value":"md`\n## Contraction\nIf there is insufficient confidence in FLOAT, causing there to be a low demand and a relatively low market price, we run a \"reverse dutch auction\". The protocol buys FLOAT off the market to push the market price towards the target. If the Basket Factor is less than 1, the Protocol will purchase FLOAT off the market using a blend of ETH from the Basket and newly minted BANK tokens. This comes at a cost to BANK holders. However, one could argue that there is a subtle incentive for BANK holders to purchase FLOAT in advance of a down contraction event to minimise their losses due to BANK inflation. This in turn gradually drives up the market price of FLOAT pushing it towards the target before the stabilisation event has occurred.\n`","pinned":false,"hidden":false,"mode":"ojs"},{"id":38,"value":"md`\n\n## Lack of Peg\nFLOAT being without a peg means that we are not concerned with an exact altering of the FLOAT supply in a single auction. This flexibility enables the Protocol to 'relaunch' FLOAT in the event of a market crisis. As stated previously, the Target Price depends on the value of the Basket and the demand for FLOAT, therefore in prolonged market downturns the Target Price is gradually reduced and tends to that of the market. The ability to shift price pressure between the target price of FLOAT, the Basket, and BANK tokens alongside the lack of peg enables the Protocol to be resilient in various market conditions.\n`","pinned":false,"hidden":false,"mode":"ojs"},{"id":94,"value":"md`Next up, we look at how we stabilise the market price to target.\n\nNext`","pinned":false,"hidden":false,"mode":"ojs"}],"files":"$W32","stdlib":"1","titling":"auto"}