HAI DAMO
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References
Integrations
Capitalization Method
POL + PCV

# What is Capitalization?

The Capitalization Method is a key component of the protocol. It provides the protocol with extra revenue streams to sustain solid APYs, a means to own the respective tokens liquidity, and other treasury assets. Capitalization Method (CM) offers the end user to unlock DAMO at a discount or premium. The protocol marks caps with a price and the amount of DAMO tokens the user will receive upon the end of a vesting period. This method of buying liquidity for a discount in a governance token over a vested period of time is a mechanism first seen in Olympus DAO. CM takes it a step further in introducing liquidated discounted collateral positions. (wETH, DAI, etc.)
Cap is the name given to the instrument deployed to facilitate the transaction of discounted DAMO and POL. The Capitalization Method was inspired by the mechanism used to acquire POL for Olympus DAO.
Capitalizations will offer different discount rates that will be monitored by the DAO. This can make cap prices also fluctuate with what is demanded for the DAO's treasury along with the collateralization of each DIV. CM also enables HAI DAMO to own its liquidity. Protocol-owned liquidity is a very important function within the HAI DAMO ecosystem. More POL guarantees the user that there is always locked exit liquidity in trading pools to facilitate market operations and protect token holders from liquidity providers pulling liquidity. This adds additional certainty for DIV and DAMO token holders while allowing the protocol to gain revenue from LP rewards on DEXs for the treasury.

# Caps

The Cap discount is calculated using the following formula:
$capDiscount = (marketPrice - capPrice) / marketPrice$
The Cap price is determined by the debt ratio of the protocol along with the Cap Control Variable (CCV). This scaling variable allows us to control the rate at which the Cap price increases and can be seen in the following equation:
$capPrice = debtRatio * CCV$
Note that the cap price is independent of the market price, as no data from price oracles are used when determining the cap price.
The debt ratio is determined by the amount of DAMO owed to the users who participate in the Capitalization Method divided by the total supply of tokens allocated for rewards. As the debt ratio increases, it is implied that the demand is also increasing which results in a higher Cap price. The equation can be seen below:
$debtRatio = tokenOwed / rewardSupply$