> For the complete documentation index, see [llms.txt](https://mmfinance.gitbook.io/hakuna-matata/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://mmfinance.gitbook.io/hakuna-matata/protocol/bonds-mechanism.md).

# Bonds Mechanism

### What are HBOND? <a href="#what-are-tbond-bonds" id="what-are-tbond-bonds"></a>

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

### When can I buy HBOND? <a href="#when-can-i-buy-tbond-bonds" id="when-can-i-buy-tbond-bonds"></a>

HBOND can be purchased only on contraction periods, when TWAP of **HKN** is below 1.

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

Note: HBOND TWAP (time-weighted average price) is based on **HKN** price TWAP from the previous epoch as it ends. This mean that **HKN** TWAP is real-time and HBOND TWAP is not.

### Where can I buy HBOND? <a href="#where-can-i-buy-tbond-bonds" id="where-can-i-buy-tbond-bonds"></a>

You can buy HBONDs if any are available, through the PIT on Savanna Finance, anyone can buy as many HBONDs as they want as long as they have enough **HKN** to pay for them.

There is a limit amount (3% of **HKN** current circulating supply) of available HBONDs per epoch while on contraction periods, and are sold as first come first serve.

### Why should I buy HBOND? <a href="#why-should-i-buy-tbond-bonds" id="why-should-i-buy-tbond-bonds"></a>

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.

HBONDs don't have a expiration date, so you can view them as a investment on the protocol, because long-term you get benefits from holding bonds.

### Incentives for holding HBOND <a href="#incentives-for-holding-tbond" id="incentives-for-holding-tbond"></a>

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

So after you buy HBOND using **HKN**, you get 2 possible ways to get your **HKN** back:

1. Sell back your HBOND for **HKN** while peg is between 1.01 - 1.1 (1 **SVN**) with no redemption bonus. This to prevent instant dump after peg is recovered
2. Sell back your HBOND for **HKN** while peg is above 1.1 (1 **SVN**) with a bonus redemption rate

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

{% hint style="info" %}
Example:

1. When **HKN** = 0.8, burn 1 **HKN** to get 1 HBOND (HBOND price = 0.8)
2. When **HKN** = 1.15, redeem 1 HBOND to get 1.105 **HKN** (HBOND price = 1.27)
   {% endhint %}

So, which one is better?

If I buy **HKN** at 0.8, and hold it until 1.15 and then sell, I'm getting +$0.35 per **HKN**

But, if I buy **HKN** at 0.8, burn it for HBOND, and redeem it at 1.15, I'm getting 1.105 **HKN** \* 1.15 (**HKN** current price) = 1.271 (+$0.47) per HBOND 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 **HKN** and HBOND holders when needed.

### When can I swap HBOND for a bonus? <a href="#when-can-i-swap-tbond-for-a-bonus" id="when-can-i-swap-tbond-for-a-bonus"></a>

HBOND TWAP (time-weighted average price) is based on **HKN** price TWAP from the previous epoch as it ends. This mean that **HKN** TWAP is real-time and HBOND TWAP is not. In other words, you can redeem HBOND for a bonus when the previous epoch's TWAP > 1.1.