II. Two Core Concepts

1. Backing Price

Definition:

BackingPrice = Total Treasury Value / Total ARK Supply

• Total Treasury Value: Total value of protocol treasury (USDT, ETH, LP, bond assets, etc.)

• Total ARK Supply: Total ARK issuance (including circulating and locked)

Significance of Backing Price:

• It represents the protocol's internal value support estimate for each ARK

• It serves as the core benchmark for all token issuance and price stabilization modules

• If market price falls below backing price, it indicates a breakdown in market trust of the protocol's value

2. Premium Index

Definition:

Premium = Market Price / Backing Price

• Premium is the ratio of market price to protocol backing price and serves as the basis for determining whether EM is activated.

• The protocol allows token issuance only when Premium ≥ Min Premium (minimum premium threshold). This setting prevents excessive debt issuance when the market lacks confidence.