Bonds are unique tokens that can be utilized to help stabilize BASED price around peg (1 TOMB) by reducing circulating supply of BASED if the TWAP (time-weighted-average-price) goes below peg (1 TOMB).
Every new epoch on contraction periods, BBONDs are issued in the amount of 3% of current BASED circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of BASED, no more bonds will be issued.
Note: BBOND TWAP (time-weighted average price) is based on BASED price TWAP from the previous epoch as it ends. This mean that BASED TWAP is real-time and BBOND TWAP is not.
You can buy BBONDs if any are available, through the Parthenon on BasedFinance.io, anyone can buy as many BBONDs as they want as long as they have enough BASED to pay for them.
There is a limit amount (3% of BASED current circulating supply) of available BBONDs per epoch while on contraction periods, and are sold as first come first serve.
First and most important reason is Bonds help maintain the peg, but will not be the only measure use to keep the protocol on track, more on that on DAO Fund section here.
BBONDs don't have a expiration date, so you can view them as a investment on the protocol, because longterm you get benefits from holding bonds.
The idea is to reward BBOND buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy BBOND using BASED, you get 2 possible ways to get your BASED back:
- 1.1.Sell back your BBOND for BASED while peg is between 1 - 1.1 (1 TOMB) with no redemption bonus. This to prevent instant dump after peg is recovered
- 2.2.Sell back your BBOND for BASED while peg is above 1.1 (1 TOMB) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from BBONDs.
- 1.1.When BASED = 0.8, burn 1 BASED to get 1 BBOND (BBOND price = 0.8)
- 2.2.When BASED = 1.15, redeem 1 BBOND to get 1.105 BASED (BBOND price = 1.27)
If I buy BASED at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per BASED
But, if I buy BASED at 0.8, burn it for BBOND, and redeem it at 1.15, I'm getting 1.105 BASED * 1.15 (BASED current price) = 1,271 (+0.47$) per BBOND redeemed.
But what if getting back to peg is taking too long ?
We are going to adjust our use cases, to have different behaviors on contraction and expansion periods to benefit BASED and BBOND holders when needed.
BBOND TWAP (time-weighted average price) is based on BASED price TWAP from the previous epoch as it ends. This mean that BASED TWAP is real-time and BBOND TWAP is not. In other words, you can redeem BBOND for a bonus when the previous epoch's TWAP > 1.1.