Kerosene is a token that allows the minting of DYAD stablecoins against a collateral surplus within its ecosystem. Kerosene operates by enabling users to leverage this surplus collateral for minting DYAD, enhancing the overall minting capacity when deposited alongside other collaterals in Notes. The protocol deterministically sets Kerosene's value based on the level of overcollateralization in the DYAD system, making it as valuable as the surplus collateral (C-D) available.

Kerosene is not additional collateral itself but serves as a right to mint DYAD against the existing surplus. Its value, while defined by the protocol, may fluctuate in secondary markets. Should Kerosene's market price fall below its protocol-defined value, arbitrage opportunities arise, aligning its price back to the intended parity since acquiring Kerosene at a discount effectively means obtaining DYAD for less.