# Collateral Ratio

TCR and ECR

### Target Collateral Ratio

Target Collateral Ratio (the "TCR") represents the ratio needed to reach the desired asset price.
• The TCR is used in the oUSD minting calculation formula in the form of a percentage.
• The TCR will be automatically calculated and established one time per hour, with the possible step of 0.25%.
Condition
Result
< $1 (TWAP) The protocol increases TCR >$1 (TWAP)
The protocol lowers TCR

### Effective Collateral Ratio

Effective Collateral Ratio (the "ECR") represents the amount of USDC token stored as collateral for the oUSD.
• The ECR is used in the oUSD redeeming calculation formula in the form of a percentage.
• After redeeming, for every oUSD the user receives the required amount of USDC and ORU tokens to achieve an equivalent value in dollar terms.
Condition
Result
TCR < ECR
The protocol is overcollateralized
TCR > ECR
The protocol is undercollateralized
$ECR = \cfrac{\text{Total Collateral Value}}{\text{Total oUSD Supply}}$