Project Obligation

The Project Obligation refers to the current liability that a cryptocurrency project has based on the current price of the underlying token. It represents the amount the project is committed to provide to the investor at maturity of the Liquidity Note, arising from features like downside protection and upside boost. This obligation is calculated based on the project's share of the Liquidity Provider (LP) collateral and the current market price.

Mechanics

• Current Liability Based on Current Price: The Project Obligation is not a future or contingent liability; it is a present obligation determined by the current price of the underlying token. It quantifies the amount the project must provide to the investor at maturity according to the terms of the Liquidity Note.

• Downside Protection: If the price of the underlying token has decreased since the issuance of the Liquidity Note, the project is obligated to cover the investor's losses up to the level specified by the downside protection. This obligation is calculated based on the current price and reflects the immediate liability the project has to the investor.

• Upside Boost: If the price of the underlying token has increased, the project may have an obligation to provide additional gains to the investor, as specified by the upside boost feature. This also depends on the current price and represents a current liability.