Bonds Mechanism
GBOND
Bonds are unique tokens that can be utilized to help stabilize GLX price around peg (1 GLMR) by reducing circulating supply of GLX if the time-weighted average price (TWAP) goes below peg (1 GLMR).
Buying GBONDs
Every new epoch on contraction periods, GBONDs are issued in the amount of 3% of current GLX circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of GLX, no more bonds will be issued.
Note: GBOND TWAP is based on GLX price TWAP from the previous epoch as it ends. This mean that GLX TWAP is real-time and GBOND TWAP is not.
You can buy GBONDs if any are available, through the Treasury on Galaxy Finance, anyone can buy as many GBONDs as they want as long as they have enough GLX to pay for them.
There is a limited amount (3% of GLX current circulating supply) of available GBONDs per epoch while on contraction periods, and they are sold as first come first serve.
Why buy GBOND?
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.
GBONDs don't have an expiration date, so you can view them as an investment on the protocol, because longterm you get benefits from holding bonds.
Incentives for holding GBOND
The idea is to reward GBOND buyers for helping the protocol, while also protecting the protocol from being manipulated from big players.
So after you buy GBOND using GLX, you get 2 possible ways to get your GLX back:
Sell back your GBOND for GLX while peg is between 1 - 1.1 (1 GLMR) with no redemption bonus. This to prevent instant dump after peg is recovered
Sell back your GBOND for GLX while peg is above 1.1 (1 GLMR) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from GBONDS.
When GLX = 0.8, burn 1 GLX to get 1 GBOND (GBOND price = 0.8)
When GLX = 1.15, redeem 1 GBOND to get 1.105 GLX (GBOND price = 1.27)
If I buy GLX at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per GLX
But, if I buy GLX at 0.8, burn it for GBOND, and redeem it at 1.15, I'm getting 1.105 GLX * 1.15 (GLX current price) = 1.271 (+0.47$) per GBOND 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 GLX and GBOND holders when needed.
Swapping GBOND for a bonus
To encourage redemption of GBOND for GLX when GLX TWAP > 1.1 and incentivise users to redeem at a higher price, GBOND redemption will be more profitable with a higher GLX TWAP value. At those times the GBOND to GLX ratio will be 1:R, where R can be calculated in the formula as shown:
where
GBOND TWAP is based on GLX price TWAP from the previous epoch as it ends. This mean that GLX TWAP is real-time and GBOND TWAP is not. In other words, you can redeem GBOND for a bonus when the previous epoch's TWAP > 1.1.
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