What are Priceless Synthetic Tokens?
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Priceless synthetic tokens are synthetic tokens that are securely collateralized without an on-chain price feed. These tokens are designed with mechanisms to incentivize token sponsors (those who create synthetic tokens) to properly collateralize their positions. These mechanisms include a liquidation and dispute process that allows tokenholders to be rewarded for identifying improperly collateralized token sponsor positions. The dispute process relies on an optimistic oracle, the UMA DVM, to settle disputes regarding liquidations.
To ensure that the rewards for liquidations and disputes are economical (i.e. worth the gas/transaction cost to liquidate or dispute), deployers of this financial contract template can set a minimum sponsor size. This is the minimum number of tokens that a token sponsor must have created against the contract. Any action that would reduce a token sponsor's position to below this threshold is disallowed and will revert. This includes partial liquidations that leave the sponsor's position smaller than the minimum size, token redemptions that bring the position below the minimum size, and new position creations that request to mint fewer than the minimum number of tokens.
