Bonds are unique tokens that can be utilised to help stabilise MyUSD price around peg ($1) by reducing the circulating supply of MyUSD if the TWAP (time-weighted-average-price) goes below peg ($1).
Every new epoch in contraction periods, Bonds are issued in the amount of 3% of the current MyUSD circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of the circulating supply of MyUSD, no more bonds will be issued.
Note: BOND TWAP (time-weighted average price) is based on MyUSD price TWAP from the previous epoch as it ends. This means that MyUSD TWAP is real-time and BOND TWAP is not.
You can buy Bonds if any are available, through the BOND page on the MyBricks 2.0 wallet. Anyone can buy as many Bonds as they want as long as they have enough MyUSD to pay for them.
There is a limit amount (3% of MyUSD current circulating supply) of available Bonds per epoch while on contraction periods, and are sold on a first-come, first-served basis.
The main objective of Bond is to help maintain the peg, but will not be the only measure used to keep the protocol on track, more on that in the DAO Fund section here.
Bonds don't have an expiration date, so you can view them as an investment on the protocol or as an arbitrage tool, ultimately, benefiting from price fluctuations.
The idea is to reward bond buyers for helping the protocol, while also protecting the protocol from being manipulated by big players.
So after you buy bonds using MyUSD, you get 2 possible ways to get your MyUSD back:
- 1.Sell back your bonds for MyUSD while the peg is between 1 - 1.1 (1 BUSD) with no redemption bonus. This is to prevent instant selling after the peg is recovered.
- 2.Sell back your bonds for MyUSD while the peg is above 1.1 (USDC) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from Bonds.
- 1.When MyUSD = 0.8, burn 1 MyUSD to get 1 Bond (Bond price = 0.8)
- 2.When MyUSD = 1.15, redeem 1 Bond to get 1.105 MyUSD (Bond price = 1.27)
So, which one is better?
If I buy MyUSD at 0.8, hold it until 1.15 and then sell, I'm getting +0.35$ per MyUSD
But, if I buy MyUSD at 0.8, burn it for Bond, and redeem it at 1.15, I'm getting 1.105 MyUSD * 1.15 (MyUSD current price) = 1,271 (+0.47$) per Bond redeemed.
But what if getting back to peg is taking too long ?
We are going to adjust our use cases, to have different behaviours on contraction and expansion periods to benefit MyUSD and Bond holders when needed.
BOND TWAP (time-weighted average price) is based on MyUSD price TWAP from the previous epoch as it ends. This means that MyUSD TWAP is real-time and BOND TWAP is not. In other words, you can redeem Bonds for a bonus when the previous epoch's TWAP > 1.1.