3）Settlement

Every token system requires a settlement mechanism. The purpose of the settlement mechanism is to ensure that the fixed tokens trade at the same price as the target asset at maturity.

Cash Settlement

More accurately, settlement paid in collateral assets is a settlement mechanism that relies on an accurate price prediction of the target asset relative to the collateral asset. In this mechanism, fixed tokens can be redeemed at face value at maturity, with the redeemer receiving an appropriate amount of collateral assets for settlement. Specifically, once a particular Mor expires, anyone can call the asset contract function, which will determine the current price of the target asset based on the collateral asset's price and store it as the settlement price. Subsequently, anyone can redeem an equivalent amount of collateral at the settlement price. Additionally, after expiration, any vault owner can withdraw their collateral, minus the value of outstanding debts. The advantage of this settlement mechanism is that it can support any target asset, not just BNB assets. However, it requires an accurate prediction of the settlement price. Furthermore, after the settlement moment ends, the Mor price starts tracking the collateral asset's price instead of continuing to track the target asset's price.

Physical Settlement through Auction

If the target asset itself is a BNB asset on the Ethereum blockchain, then Mor can use physical settlement for settlement, meaning that Mor holders will receive the underlying asset.

This can be achieved through auctions. For each vault with outstanding debts, collateral can be sold through a Dutch reverse auction to repay debts. Suppose an expired vault has 1 BNB as collateral and 100 Mor as outstanding debt. The protocol will offer 0.01 BNB to anyone in exchange for 100 Mor, gradually increasing the offer over time until someone accepts. The remaining collateral will be returned to the vault creator, and the tokens collected in these auctions will be distributed to Mor holders.

It is convenient for them to continue trading closer to the target asset after expiration, but this is not a strict requirement, as one mechanism—cash settlement—does not achieve this goal.

Vault holders can shorten this process by repaying their fixed debts or accepting auction offers themselves.

If the collateral requirement is high enough, the vault will not become a disadvantage compared to cash settlement. One advantage of this mechanism is that, assuming the auction is successful, each Mor will be fully supported by the target asset instead of a certain amount of collateral. This means that Mor holders will maintain the same risk exposure to the target asset without taking any action themselves (although they will no longer benefit from the target asset) and can redeem it at their leisure. However, this mechanism does not allow borrowers to maintain their debt status after expiration; it only exposes them to leveraged risk on the remaining collateral.