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Perpetual Ratio

## What is Perpetual Ratio?

The perpetual ratio is a simple but effective concept that allows your receipt tokens (and hence, your stake in the vault) to appreciate in value over time. In order to understand how the perpetual ratio works, it is first necessary to understand what happens when you deposit into one of our vaults.
Each vault has its own unique receipt token, which is minted every time you make a deposit. These receipt tokens have an inherent value that is linked to the perpetual ratio of the vault. As the Perpetual Ratio for a vault increases, so does the value of your underlying receipt token. In this way, the Perpetual Ratio acts as an internal pricing mechanism for our vaults.
At a high level, you can think of the perpetual ratio as an exchange rate between the vault token and the vault receipt token. For example, using the currency pair for the pound and the euro, GBP/EUR. An exchange rate of 100 would mean that 1 pound equals 100 euros. In a similar fashion, if the perpetual ratio of a vault was 100, it would mean 1 vault receipt token equals 100 of the underlying vault token.
$Perpetual Ratio=TokenSupply/Receipt Supply$
In short, the perpetual ratio is a unique and powerful mechanism that has been integrated across all our vaults to ensure you're able to generate significant returns over time. Not only does it provide a fantastic opportunity for those who want to see their balance grow exponentially, but it also allows you to earn an increasing amount of rewards as your underlying balance grows.
👉 Example: Perpetual Ratio

## Why does the Perpetual Ratio increase?

The way in which the perpetual ratio operates can be likened to a double or two-sided scale, whereby its value dictates the difference in weight (supply) of staked tokens in comparison to the weight (supply) of receipt tokens.
Imagine you have a two-sided scale with two pans. On the left pan, you have staked tokens. On the right pan, you have receipt tokens. When the supply of the staked token increases but the supply of its receipt token does not, there is an imbalance - causing the right pan holding the receipt tokens to increase. By applying this analogy we can see how the perpetual ratio will increase in value when there is an increased amount of staked tokens held in a vault when compared to its supply of receipt tokens.
This imbalance is increased on a few occasions when the protocol adds tokens to the vault without minting an equivalent amount of receipt tokens. Examples of when this might happen include when the protocol adds tokens acquired from the deposit fee and withdrawal fee. As a result, you can expect the perpetual ratio for a vault to increase on every deposit (and every withdrawal if there is a withdrawal fee). Check out the example below to learn how it works!
👉 Example: How the Deposit Fee Increases the Perpetual Ratio

## How do I benefit from the Perpetual Ratio?

The perpetual ratio is a key metric that will help vault participants track the value of their receipt tokens. As the perpetual ratio increases so will the value of your receipt tokens.
But what does this mean? Well as the value of your receipt tokens increases, it effectively means your staked balance in the vault is also increasing - which also translates to you earning a greater share of the rewards allocated to the vault (if applicable).
Simply put, the higher the perpetual ratio, the more valuable your stake in the vault will be. So, if you're looking to maximise its benefit, you'll want to aim for a low perpetual ratio by entering a vault as early as possible, and staying staked in the vault for as long as possible.
With that said, we want to reiterate that remaining staked or entering early is not required - meaning you can still benefit from the perpetual ratio at any point in time as it's guaranteed to increase as the vaults TVL grows. So whatever your strategy may be, ensure that you're aware of how the perpetual ratio works and how it affects your position in the vault - and keep in mind when you do make a withdrawal, you won't obtain the same amount of receipt tokens when you redeposit as the perpetual ratio would've increased.
Check out the example below to learn about how your staked balance can grow dramatically by the perpetual ratio rising from vault deposits alone. In the example below, the users staked balance increased from 1,000 to 5,398.80 - that's an increase of over 500%!
👉 Example: How vault participants benefit from the Perpetual Ratio

## Can a withdrawal decrease the Perpetual Ratio?

No. The only way the perpetual ratio for a vault can decrease is if every participant in the vault were to withdraw their entire balance of staked tokens at the same time, at which point the ratio will drop to a value of zero. In other words, it will never decrease when you make a withdrawal.
Here's why: when a withdrawal is made, our protocol removes staked tokens equivalent in value to the receipt tokens that are being removed and burnt. Unless, of course, a withdrawal fee is applicable in which case it will burn 100% of the receipt tokens being withdrawn while removing a lower equivalent value of staked tokens - thus increasing the vaults perpetual ratio.
It's a simple concept, really. The perpetual ratio can only decrease on a withdrawal if the supply of staked tokens were to somehow decrease while the supply of receipt tokens remains the same or increases - which can never happen.
Think of it like a double or two-sided scale - On one side of the scale is a pile of receipt tokens. On the other side is a pile of staked tokens. The perpetual ratio is like a balance point on this scale - it's a mathematical formula that dictates the amount of staked tokens in a vault against the supply of receipt tokens for the vault - when an equal amount of weight is removed from both sides, the scale will not move up or down.
• For example, let's say the supply of staked tokens in a vault was 100,000 and the supply of the vaults receipt token was 1000.
• The vaults perpetual ratio would be (100,000/1000) = 100. This means for every receipt token there are 100 staked tokens.
• Now let's say you decide to make a withdrawal of 100 staked tokens, which equates to 1 receipt token.
• Our protocol will burn the 1 receipt token and provide you with 100 staked tokens.
• As a result, the supply of staked tokens in a vault has now decreased to 99,900 and the supply of the vaults receipt token has decreased to 999.
• But, has the perpetual ratio dropped? No, it has not. With the 100 staked tokens removed and the 1 receipt token burnt, the Perpetual Ratio will still be 100.
• The vaults perpetual ratio would be (99,900/999) = 100. This means for every receipt token there are 100 staked tokens.
So, in short, don't worry about the perpetual ratio - it's perpetual!

## Can I purchase MetaVault Receipt tokens?

Yes, you're able to purchase MetaVault receipt tokens (purchase fee of 1% applicable). In doing so, you'll be able to speculate on the rise of a MetaVaults Perpetual Ratio. But, as the MetaVault receipts are being held in your wallet, you'll not be earning any MetaRewards.