At the heart of the Goldilocks project are the LOCKS token and the bespoke AMM that governs its behavior. This AMM will contain two basic liquidity pools, the floor supporting liquidity pool (FSL) and the price supporting liquidity pool (PSL). Both pools will be comprised entirely of HONEY, Berachain's native (fully collateralized) stablecoin. Using these pools, the AMM has the ability to burn and mint LOCKS through the following basic mechanisms:

(i) Firstly, a user can always redeem LOCKS tokens in exchange for a proportional share of the FSL. More precisely, if S is the total supply of LOCKS, then the AMM allows a user to redeem 1 LOCKS token for a quantity of HONEY equal to FSL/S. We call FSL/S the `floor price’ of LOCKS, since it represents a minimum price for which a LOCKS token can always be redeemed at the AMM. Upon redemption, the AMM burns all the redeemed LOCKS tokens, ensuring that redemption can never lower the floor price of the remaining tokens.

(ii) As well as redeeming LOCKS for the floor price, users can also sell LOCKS to the AMM at the market price, which will always be greater than the floor price. In that case, they will burn their tokens in exchange for a proportional share of the FSL as well as some amount of the PSL (see the Mechanisms page for a description of how the market price is determined by the AMM).

(iii) Finally, users can buy LOCKS from the AMM by paying the market price (never less than the floor price), in exchange for which the protocol mints them the appropriate number of LOCKS tokens.

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