# Collateral Backing Ratio (CBR)

### **Collateral Backing Ratio (CBR)**

Each Pod maintains a **Collateral Backing Ratio (CBR)**, which defines the amount of TKN backing each pTKN:

> **CBR = TKN Balance / pTKN Supply**

As Pods generate revenue through wrapping, unwrapping, trading activity, and arbitrage flows, a portion of this revenue is used to burn pTKN supply. Since the underlying TKN balance remains intact, this causes the CBR to increase over time and enables each pTKN to redeem a larger share of TKN.

<figure><img src="/files/lMwCA2mGjRx5h6nnZW5n" alt=""><figcaption></figcaption></figure>

**Example:**

* TKN held in Pod: **1,200**
* pTKN in circulation: **1,000**
* Resulting CBR: **1.2**

Each pTKN is redeemable for 1.2 TKN (less applicable fees). Likewise, wrapping 1.2 TKN would mint 1 pTKN.

<figure><img src="/files/9EswccP7pYipL81nEiKk" alt=""><figcaption></figcaption></figure>

> *CBR increases irreversibly and does not decline. This makes pTKN a value-accruing asset that grows in redemption value over time.*


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