Bonds Mechanism
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Bonds are unique tokens that can be utilized to help stabilize TOMB price around peg (1 FTM) by reducing circulating supply of TOMB if the TWAP (time-weighted-average-price) goes below peg (1 FTM).
TBOND can be purchased only on contraction periods, when .
Every new epoch on contraction periods, TBONDs are issued in the amount of 3% of current TOMB circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of TOMB, no more bonds will be issued.
Note: TBOND TWAP (time-weighted average price) is based on TOMB price TWAP from the previous epoch as it ends. This mean that TOMB TWAP is real-time and TBOND TWAP is not.
You can buy TBONDs if any are available, through the PIT on tomb.finance, anyone can buy as many TBONDs as they want as long as they have enough TOMB to pay for them.
There is a limit amount (3% of TOMB current circulating supply) of available TBONDs 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 .
TBONDs 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 TBOND buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy TBOND using TOMB, you get 2 possible ways to get your TOMB back:
Sell back your TBOND for TOMB while peg is between 1 - 1.1 (1 FTM) with no redemption bonus. This to prevent instant dump after peg is recovered
Sell back your TBOND for TOMB while peg is above 1.1 (1FTM) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from Tbonds.
Example:
When TOMB = 0.8, burn 1 TOMB to get 1 TBOND (TBOND price = 0.8)
When TOMB = 1.15, redeem 1 TBOND to get 1.105 TOMB (TBOND price = 1.27)
So, which one is better?
If I buy TOMB at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per TOMB
But, if I buy TOMB at 0.8, burn it for TBOND, and redeem it at 1.15, I'm getting 1.105 TOMB * 1.15 (TOMB current price) = 1,271 (+0.47$) per TBOND 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 TOMB and TBOND holders when needed.
TBOND TWAP (time-weighted average price) is based on TOMB price TWAP from the previous epoch as it ends. This mean that TOMB TWAP is real-time and TBOND TWAP is not. In other words, you can redeem TBOND for a bonus when the previous epoch's TWAP > 1.1.