Bonds Mechanism

Bonds are unique tokens that can be utilized to help stabilize OWL price around peg (1 MOVR) by reducing circulating supply of OWL if the time-weighted average price (TWAP) goes below peg (1 MOVR).

Records of Bond transactions can be viewed in the Treasury logs.

Buying OBOND

Every new epoch on contraction periods, OBONDs are issued in the amount of 3% of current OWL circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of OWL, no more bonds will be issued.

Example: With a current circulating supply of 6,000 OWL, 180 OWL worth of bonds would become available during the epoch after OWL TWAP has fallen below peg.

OBOND TWAP (time-weighted average price) is based on OWL price TWAP from the previous epoch as it ends. This mean that OWL TWAP is real-time and OBOND TWAP is not.

You can buy OBONDs when available through the Treasury on Athena Money. Anyone can buy as many OBONDs as they want as long as they have enough OWL to pay for them.

There is a limited amount (3% of OWL current circulating supply) of available OBONDs per epoch while on contraction periods. They are sold as first come first serve.

Why should I buy OBOND?

First and most important reason is that Bonds help maintain the peg.

Because OBONDs don't have an expiration date, so you can view them as an investment in the protocol, granting longer term benefits to bond holders.

Incentives for holding OBOND

The idea is to reward OBOND buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.

After buying OBOND using OWL, there are two possible ways to get your OWL back:

1. Sell back your OBOND for OWL while peg is between 1 - 1.1 with no redemption bonus. This is to prevent instant dumping after peg is recovered.

2. Sell back your OBOND for OWL while peg is above 1.1 with a bonus redemption rate.

The longer you hold, the more both the protocol and you benefit from OBONDS.

Example:

• When OWL = 0.8 MOVR, burn 1 OWL to get 1 OBOND (OBOND price = 0.8)

• When OWL = 1.15 MOVR, redeem 1 OBOND to get 1.105 OWL (OBOND price = 1.27)

If I buy OWL at 0.8, hold it until 1.15, and then sell, I profit +0.35 per OWL.

But, if I buy OWL at 0.8, burn it for OBOND, and redeem it at 1.15, I receive 1.105 OWL * 1.15 (OWL current price) = 1.271, a profit of +0.47 per OBOND 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 OWL and OBOND holders when needed.

Swapping OBOND for a bonus

OBOND TWAP (time-weighted average price) is based on OWL price TWAP from the previous epoch as it ends. This means that the current OWL TWAP may be >1.1, but the OBOND bonus will not be active until an epoch has ended with TWAP >1.1.

To encourage redemption of OBOND for OWL when OWL TWAP > 1.1 and incentivise users to redeem at a higher price, OBOND redemption will be more profitable with a higher OWL TWAP value, of which OBOND to OWL ratio will be 1:R, where R can be calculated in the formula as shown below:

$$R=1+([OWL(​twapprice)−1]∗coeff)$$

where coeff=0.7.