Bonds are unique tokens that can be utilized to help stabilize RABBIT price around peg (1 FTM) by reducing circulating supply of RABBIT if the TWAP (time-weighted-average-price) goes below peg (1 FTM).
RBOND can be purchased only during contraction periods, when TWAP of RABBIT is below 1.
At the beginning of every new epoch during contraction periods, RBONDs are issued in the amount of 3% of current RABBIT circulating supply, with a max debt amount of 35%. This means that if bonds reach 35% of circulating supply of RABBIT, no more bonds will be issued.
There is a limit of available RBONDs per epoch during contraction periods (3% of RABBIT's current circulating supply), and are sold first-come-first-serve.
First and most important reason is Bonds help maintain the peg, but they are not the only measure in place to keep the protocol on track.
RBONDs don't have an expiration date, so you can view them as an investment in the long-term health of the protocol to be redeemed for a premium at a later date.
The idea is to reward RBOND buyers for helping the protocol, while also protecting the protocol from being manipulated by big players.
So after you buy RBOND using RABBIT, you get 2 possible ways to get your RABBIT back:
- 1.Sell back your RBOND for RABBIT while the peg is between 1 - 1.1 (1 FTM) with no redemption bonus. This is in place to prevent an instant dump as soon as peg is recovered.
- 2.Sell back your RBOND for RABBIT while the peg is above 1.1 (1FTM) with a bonus redemption rate
The longer you hold, the more both the protocol and you benefit from RBONDs.
So, which one is better?
If I buy RABBIT at 0.8, and hold it until 1.15 and then sell, I'm getting +0.35$ per RABBIT
But, if I buy RABBIT at 0.8, burn it for RBOND, and redeem it at 1.15, I'm getting 1.105 RABBIT* 1.15 (RABBIT current price) = 1,271 (+0.47$) per RBOND redeemed.
But what if getting back to peg is taking too long ?
We will adjust our use cases, to have different behaviors on contraction and expansion periods to benefit both RABBIT and RBOND holders when needed.
To encourage the redemption of RBOND for RABBIT when RABBIT's TWAP > 1.1 and in order to incentivize users to redeem bonds at a higher price, RBOND redemption is designed to be more profitable with a higher RABBIT TWAP value. The RBOND to RABBIT ratio is 1:R, where R can be calculated using the formula as shown below:
You can only redeem RBONDs for a premium when the previous epoch's TWAP is greater than 1.1.