Bonds are the mechanism used to return BASED to peg when it deviates below Ethereum.
bBOND tokens activate when BASED deviates from its peg. Here's how it functions:
- Purchase Conditions: Available when BASED is below Ethereum.
- TWAP Constraint: No issuance if BASED's TWAP is between
- Redemption: Available for redemption when BASED rises above the Ethereum.
- For example, if BASED's TWAP is less than 1, exchanging BASED for bBOND will occur at a 1:1 ratio.
As BASED rises above its peg, the redemption value of bBOND becomes more lucrative to incentivize users to exchange their bBOND for BASED.
The bBOND to BASED ratio will be 1:R, with R being determined with the formula below.
Δ = BASED TWAP Price, β = Coefficient of 0.7
When BASED is trading over peg, users can utilize the Zapper to transition from bBOND to bSHARE in a simplified process:
bBOND ➡️ BASED ➡️ wETH ➡️ bSHARE
Stabilizing the Ecosystem: By purchasing bBOND during downturns, you help stabilize the BASED price and ensure its peg to Ethereum.
Profit Opportunities: The structured redemption mechanism means that proactive users can benefit from price fluctuations.
Supporting the Protocol: Engaging with bBOND means you're actively participating in the protocol's stability mechanism, fostering a more resilient ecosystem.
Remember, as with all crypto assets and mechanisms, there's a level of risk associated with buying and redeeming bonds. Always ensure you're well-informed before making any decisions.